RBA rings alarm on high debt levels
Risks to financial stability could be building as house prices and debt levels keep rising, the Reserve Bank has caution...
While the housing sector is predicted to drive economic growth over the next four years, Australia’s economy is in for tough times, according to a new prediction from economic forecaster BIS Shrapnel.
The company’s latest report indicated the housing industry is a bright spot in the economic outlook.
“The long-awaited recovery in dwelling investment is now entrenched,” the report stated.
“Having been delayed due to weak housing market sentiment and excessive caution by investors, the expectation of low interest rates for an extended period, combined with a substantial deficiency of residential stock, is driving a solid increase in dwellings building.”
Queensland and New South Wales were tipped as the growth leaders in dwelling construction due to sizeable stock deficiencies.
However, the overall economy is expected to slow over the next four years, according to BIS Shrapnel senior economist Richard Robinson.
“The upshot is that we are a long way from stable, balanced growth or what feels like a healthy economy,” Mr Robinson said.
The report predicts local consumption and investment expenditure will experience its weakest four-year period since the early-1990s recession.
The employment sector is also likely to stagnate over the short term.
“Employment growth will be soft. We expect that only 668,000 jobs will be created over these next four years,” Mr Robinson said.
“It’s little better than the last four years, and it will hardly make a dent in unemployment numbers.”
As mining investment is predicted to ease further, non-mining investment is not sufficiently high to replace the loss over the next four years, the report warns.
However, the economy is likely to pick up again towards the end of the decade.
“Strong growth will again resume from later this decade, with GDP and domestic demand growth lifting to around 3.5 per cent in 2018/2019 and strengthening through early next decade,” the report predicted.