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Don’t get ‘gloomy’ on Aussie economy: AMP Capital

Don’t get ‘gloomy’ on Aussie economy: AMP Capital

Taylee Lewis
— 1 minute read

Although annual GDP growth has slowed to 2.3 per cent, investors should be somewhat optimistic when it comes to the Australian economy, says AMP Capital.

According to a recent article by AMP Capital head of investment strategy and chief economist, Shane Oliver, “while growth is sub-par and growth in domestic demand is particularly weak, it’s not the recession some continue to fear”.

Mr Oliver argued there “is no reason to get overly gloomy on Australia”.

Export volumes are continuing to rise strongly as the lower Australian dollar makes exports substantially more competitive.

“Reflecting this, the current account deficit as a share of GDP is around its lowest in the last 30 years, despite plunging prices for resources exports,” said Mr Oliver.

HSBC chief economist Paul Bloxham said: “We expect exports to bounce back in May, supported by a lift in coal exports, but also by a bounce in iron ore exports.”

March quarter GDP growth was recorded at 0.9 per cent, a stronger result than expected by economists.

“Q1 GDP figures showed strong growth in resources export volumes were a key support for GDP growth in the quarter,” said Mr Bloxham.

Mr Oliver also pointed out that the current trends have implications for investors.

 “The economy is likely to avoid recession or a severe slump as growth continues to gradually rebalance. And the yields on Australian bonds, shares, commercial property and infrastructure remain relatively attractive globally,” Mr Oliver said.

 “While the Australian share market ran ahead of itself earlier this year and has been in correction mode for the last few months, by year end it should be able to push up to the 6000 level,” he said.

Mr Oliver added that as the Australian dollar falls and interest rates remain low, Australian investors need to allocate more funds offshore.

 

Don’t get ‘gloomy’ on Aussie economy: AMP Capital
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