Strategic Alternatives
Australian Outlook: Navigating Australia’s economic headwinds
Dec 7, 2023
The podcast discusses Australia's economic challenges such as softening growth, persistent inflation, and a weaker labor market. It also examines key factors to monitor and their implications for the RBA, bond market, and investors. The analysis includes topics like the labor market, fixed income markets, and navigating Australia's economic outlook.
08:27
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Quick takeaways
- Australia's long-term growth outlook suggests slower GDP growth, with pockets of stress in lower income households and rate-sensitive sectors.
- Household spending in Australia is expected to further slow due to high mortgage rates, cost of living pressures, and a potential rise in the unemployment rate.
Deep dives
Long-term macroeconomic outlook
The long-term growth outlook for Australia suggests that GDP growth will likely run below trend, although recession is not expected. Lower income and highly-indebted households, as well as rate-sensitive sectors, are experiencing pockets of stress. Australia has been lacking in the inflationary cycle due to inertia in the wage setting process, and the progress in reaching the RBA's inflation target has been slower compared to peer countries. While the RBA has already raised the policy rate, there is disagreement among investors regarding its appropriate level. A further increase in the cash rate is expected, followed by a period of monetary policy stability until cuts begin in 2025.
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