27 years recession free, and still growing
Below is a snapshot of the recent Urban Property Australia report.
The key findings of note that have a direct influence on the Geelong market include;
– Economic growth is expected from household consumption. Greater spending ensures growth in the retail sector and a direct flow in to local income.
– Employment growth is consistently strong, with Victoria a stand out, and more importantly on a micro level Geelong is a key driver in new employment delivery.
– Wage growth has been low, but with stronger labour markets this will rise, and fuel greater confidence in spending.
– Household income has not grown at the same rate as spending.
– Negative income growth will continue to apply negative pressure on inflation; keeping this at the lower end of the Reserve Bank of Australia’s preferred levels.
– This means interest rates are not expected to rise until 2019.
Urban Property Australia reports that Australia’s economy is now in the 27th consecutive year of economic growth without a recession and is expected to grow at a solid pace over the next two years. Growth is expected from household consumption and demand on exports.
Over 2017, Australia’s economy grew by 2.3%. looking forward, infrastructure spending on non-mining business investment should help the Australian economy navigate the challenges of peaking new dwelling construction. The Australian economy is forecast to grow by 2.9% in 2018 and 2.8% in 2019, boosted by the positive momentum in the global economy.
Throughout 2017, Australia’s employment growth continued to impress, rising by 403,000, of which 302,000 were full time jobs. Total Australian employment has now increased for 16 consecutive months, the longest uninterrupted stretch since the recovery from the recession in the early 1990’s. Victoria and NSW are the standout states. The strength in the economy suggests that the labour market is likely to continue to improve and the unemployment rate will gradually fall. Wage growth has been persistently low, but the improving labour market should eventually lift wages over time.
Population growth has picked up slightly over the past 3 years, due to the higher levels of overseas migration, and is currently running at an annual increase of 1.6%.
Household spending has increased 2.7% in 2017, boosted by record-high employment growth, household income has not kept up. Held back by weakness in both wage and non-wage income growth, households had to reduce their savings rate to maintain consumption growth. Looking ahead, household spending is likely to be hampered by somewhat negative wealth effects, with the pace of house price rises slowing.
Inflationary pressures remain subdued, with the underlying inflation rate remaining below the Reserve Bank of Australia’s (RBA) 2-3% band. Limited wage growth suggests that inflation is forecast to stay close to the bottom of the RBA’s target band.
As expected, the RBA Board left the cash rate at 1.5% at its March 2018 meeting. The board are continuing to look for evidence of improvement in household income growth, with wage growth still largely tracking inflation. With the expected coming downturn in residential construction and weak consumer spending, most expect that the RBA will keep the cash rate at 1.5% until 2019.
Read the Full Urban Property Australia Report here: http://www.upaustralia.com.au/situs-rerc-upa-announce-release-australian-real-estate-trends-holding-firm-asia-pacific/