Speaking at an event in Sydney yesterday, UBS Investment Bank chief economist Scott Haslem explained that while the GDP is increasing, emerging markets are the reason it is below average.
“World GDP has been going up, we continue to expect it will improve, the second point is it is not making the average line, so it is sub-par economic expansion we are engaged in,” said Mr Haslem.
“In thinking why is the global economy sub-par, the answer typically lies in that China is not growing at 10 to 12 per cent, it is growing at 7; India is not growing at 9 per cent, it is growing at 4 to 5,” he said.
Mr Haslem said Australia’s economy has been rebalancing quite well over the last six to nine months, with 3.5 per cent GDP growth, although he believes the Budget will take away confidence in the economy.
“The Budget, which wasn’t that tight, did really sucker punch confidence in the economy,” said Mr Haslem.
“The question for forecast is: has that loss of confidence really [transitioned] the economy back to where we were about a year or so ago, which is soggy 1 to 2 per cent growth, or is it just a hiccup along the way to the moderate expansion we have been forecasting?
“We are very clearly of the view it is the latter. We are going to see a temporary loss of momentum, but ultimately the economy is improving,” said Mr Haslem.
