Data from most major economies has “been surprising to the upside”, with global trade picking up and forecasts remaining stable or positive over the last year, Citi Research said.
“Some global political risks also have receded. These included risks related to Brexit, the French election and trade wars,” the company said.
However, it cautioned that uncertainty remained around the fiscal stimulus proposed by US President Donald Trump, and that this stimulus was likely to be smaller and delivered later than the US administration has suggested, reflecting similar comments recently made by Pimco.
Additionally, consumer sentiment in Australia was “at best around average”, despite above average business confidence.
“Commodity prices have risen, but this mainly reflected supply disruptions which are temporary. Share prices in Australia have underperformed global peers,” Citi Research said.
“The US dollar hasn’t been as strong as might have been expected so that there hasn’t been an additional boost to competitiveness from a marked depreciation of the Australian dollar.”
However, Fiducian said Australia’s outlook was “not compelling” despite the global economy being forecast to “slowly improve this year and into 2018”.
“The Australian economy rebounded in the December quarter, growing by 1.1 per cent for the quarter, after actually contracting by 0.5 per cent in the previous quarter,” the financial services firm said.
“In broad terms, the country’s international competitiveness has been eroded in recent years by a union-dominated labour market in key sectors, high corporate tax rates and over-regulation that has pushed up costs – including for electricity.”
Fiducian, citing the NAB Business Survey’s March results, said Australia’s major growth drivers such as liquid natural gas exports, commodity prices and housing construction were likely to fade, negatively impacting the country’s long-term outlook.
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