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Consumers, homebuilding to provide less growth for Australia in 2018-2019: report

Xinhua,April 23, 2018 Adjust font size:

SYDNEY, April 23 (Xinhua) -- A Quarterly business report by Deloitte Access Economics on Monday forecast that while Australia's economic outlook remains good, it is "likely to fall short of great."

Benefiting from positive global conditions stemming from increased infrastructure spending throughout Asia, recent tax cuts in the United States and record low interest rates around the world, Deloitte Access Economics economist Chris Richardson said the backdrop for Australia is looking good.

Despite this, however, there are some concerns when it comes to the year ahead.

Although Richardson sees the threat posed by a global trade conflict as the most immediate risk to the economy in 2018, he believes it is a "pretty small risk."

The bigger issue, according to the report, is "sprinting" global debt which puts "pressure on some industries and some economies as the slow climb in the cost of capital continues," he said.

However, while investment is on the upswing downunder, the economy more generally is being hindered by the nation's extremely low cash rate, which has stood at just 1.5 percent since August 2016.

"We sandbagged the economy from a sharper slowdown in recent years by cutting interest rates to the bone," Richardson said.

"That has left our consumers stretched and housing prices silly - which suggests consumers and homebuilding will therefore provide less support to growth in 2018 and 2019 than they did in 2016 and 2017."

"So Australia's outlook remains good, but seems likely to fall shy of being great."

But because Australia's central bank is not expected to lift interest rates until at least 2019 due to soaring personal debt levels, the report outlines that inflationary pressures are not a short term threat to the economy at the moment. Enditem