The economy – Where the bloody hell are we?
2017 will start with a new US President, more Chinese economic uncertainty, what looks to be a solid rise in commodity prices and the drawn out process of Brexit hurting both the UK and Europe. Amongst this, growth is solid, inflation appears to be edging up and markets are pricing for US rate hikes which is driving global bond yields higher.
In Australia, we have the proverbial multi-speed economy continuing to unfold. Housing construction is strong, but is this creating a glut? Are house prices poised to slump? Mining investment is in free-fall, but previous investment is driving a surge in exports. The government still wants a budget surplus but is setting a framework for a boost to infrastructure spending. Consumers are caught in the middle – feeling wealthy as house prices rise but cash strapped on the back of record low wages growth and a trend to part-time work. Can they increase spending whilst this is the case?
All the while inflation is stuck below the RBA target band and the RBA is happy to leave rates at the current record low of 1.5%.
Where to in 2017 for the economy, interest rates and the Australian dollar.