Australian economy to perform strongly amidst challenging environment in 2016

In 2016, the Australian economy is likely to perform strongly amidst challenging environment, according to Westpac. In 2015, Australia’s real GDP grew 3%, while a recent rally in commodity prices implies that risks on the downside are subsiding. But the economic growth faces major threat from global fragilities.

Global growth is likely to rebound slightly this year, but post a still sluggish growth of 3.3%, as compared with last year’s 3%. Furthermore, the Australian economy faces domestic uncertainties such as a Federal Election in 2016 that might delay investment and hiring decisions of businesses, noted Westpac.

However, domestic conditions are expected to remain uneven. Mining investment is expected to deteriorate further in 2015/2016, while the shift to strength throughout non-mining sector continues to be underway. Meanwhile, the nation’s income backdrop is expected to rebound. The terms of trade is likely to stabilize this year and next year as demand and supply move into balance, according to Westpac.

Therefore, the nominal GDP is likely to expand to 4% in 2016 from 2.4% in 2015 and accelerate to 5.6% in 2017, added Westpac. Also, employment growth is likely to moderate to around 1.5% this year, while the jobless rate is expected to reach around 5.8%-6%, partially because of home building activity.

“We forecast Australian real GDP growth of 2.8% for the year to December 2016, a touch below the 3.0% outcome for December 2015, before strengthening to 3.0% in December 2017”, added Westpac.