Australia's period of slow economic growth is unlikely to pick up in the immediate term with investment chiefs predicting a tougher outlook for the local market in the years ahead.
MLC Investment Management investment strategist Michael Karagiannis told an audience at yesterday's Morningstar Investment Conference that the Australian economy at present is "very patchy".
While Karagiannis said there was evidence of pockets of the country's economy showing strength, such as the Western Australian economy, there areequal parts of the economy that if not in recession at present they are not far from it.
"When you add that up you get a growth rate on average that looks reasonable particularly against economies in Europe and perhaps the US [United States] but frankly I don't think it necessarily points to an undercurrent vibrancy in the Australian economy at the moment," he said.
Speaking as part of an investment panel, Karagiannis said the Australian economy has noticeably slowed down over the last year or two.
He said such a slowdown brings with it the danger where, despite this week's interest rate cuts and Australia's fiscal policy making local headwinds, low confidence in an indebted household sector remains.
"While that is the case I think a lot of people out there are more focused about looking after their own personal balance sheet at this time," he added.
Schroders head of fixed income and multi-asset Simon Doyle agreed in part Karagiannis, stating the local economy will continue to "do it tough" for the next few years.
"I guess the way that I see Australia at the moment is that we're coming off the back of a decade or two where there have been some pretty strong tailwinds to the economy," Doyle said.
"The obviously ones are the commodity boom, which has floated through the terms of trade and we've seen the leveraging up of the household sector which has flowed through to the housing sector - all of these things have been pretty powerful tailwinds to growth.
He said despite this, by 2014, the business investment cycle is looking like it will tail off.
"I think, in a more structural sense, we will be finding it more difficult to grow than we certainly have done in the last five or 10 years."
In his view, Ibbotson Asia managing director Daniel Needham said the general consensus was the Australian economy is stronger, a thought process that leads to the potential for surprises.
"If you withdraw those (expanding balance sheets and commodities boom) from the economy then we could have a banking sector that could be in fairly sharp deleveraging leading to the potential for a serious financial crisis over the next five years."
