Growth prospects limited: Westpac

Growth prospects limited: Westpac
Growth prospects are limited beyond this calendar year, according to the Westpac-Melbourne Institute Leading Index.

The Index showed the likely pace of economic activity three to nine months into the future falling to 1.17 per cent in March, from 1.14 per cent in February.

Westpac chief economist Bill Evans said the index indicates economic growth in the current calendar year was in line with the RBA’s forecast of three per cent.

But he pointed to some discouraging signs ahead.

“Housing construction is likely to be contracting through 2018 while export growth will slow and the terms of trade are likely to be falling, slowing nominal income growth,” Mr Evans said.

“Prospects for an offsetting boost from household spending and business investment are not encouraging given the ongoing negative feedback loop from weak labour incomes to consumption and final sales.”

All up, he expected this would see the RBA keeping rates on hold as the central bank was concerned about rising debt and property prices to cut any further.

“The authorities are therefore opting for a policy mix of steady official rates and heightened regulatory controls around the housing market,” Mr Evans said.



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