In his latest Business Outlook, the Deloitte economist noted that, other than the long-suffering retail sector, most industries are doing well.
“Even manufacturing, the biggest loser from globalisation, was enjoying something of a renaissance. But now industry fortunes are desynchronising. The sectoral winds are changing, with a starker difference between the current winners and losers in Australia’s economy, meaning the nation is showing some modest signs of being a ‘two-speed economy’ once more,” Mr Richardson said.
“The smart money is on healthcare to continue to shoot the lights out. The NDIS is boosting funding. And, that aside, an ageing population and electoral necessity will keep the funds flowing.”
While the significant growth of professional services in recent years has slowed since an early 2017 peak, Mr Richardson believes it may stay above average amid a big corporate change agenda and rapid technological change, while the public sector is swelling amid stronger government revenues and a range of state and federal promises offered up amid the recent (and current) elections.
“East coast governments are spending on infrastructure, too, while the miners are reviving a bit of investment spending amid a surge in export prices,” he said.
Property is the biggest loser, according to the Deloitte forecaster, who noted that the downturn in the Sydney and Melbourne housing markets is causing many sectors some pain.
“Housing construction has peaked and will fall further. But it’s not alone. The property services sector, which rode the housing market wave on the way up, is now doing the same on the way down,” Mr Richardson said.
“With mortgages representing the bulk of bank loan books, growth in the finance sector is easing too.
“Retailers, already seeing low income growth, are now wearing the effects of weaker demand for housing-related goods, while the wholesale and transport parts of the retail supply chain face the same pain.”
A slowing global economy and a pick up in the pace of house price losses have trimmed Australian growth below trend, the economist said, predicting that growth will remain subdued for the rest of 2019 and into 2020.
“With house prices falling fast, consumers have become more conservative. And there’ll be fewer new homes being built – especially apartments. But don’t get carried away: this is a slowdown rather than something deeper and nastier. Although house price falls are hurting the economy, there are limits to that, partly because price falls are deepest where economies are strongest (in Sydney and Melbourne),” Mr Richardson said.
“Besides, prices rose so fast in the first place that shoppers never got too excited with their new-found wealth, meaning they aren’t pulling in their horns too deeply into the downturn either. However, slowdown it is. In addition, that weaker growth will mean slower job gains, and it may also see the recovery in wages – already slower than a wet week – slip sideways for a while.”
