OECD Economic Outlook May 2019, Country Notes: Australia

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Australia The economy is projected to continue to grow at a steady pace. New capacity in the resource sector will boost exports, although weaker growth in trading partners will slow export growth in 2019. Housing-market cooling will damp construction activity. Business investment and government spending, on the other hand, will support growth. Wages and consumer prices will pick up only gradually. Monetary policy is projected to remain unchanged until the end of 2020, reflecting moderate price pressures and weaker prospects for economic activity. Risks from the housing market and high household indebtedness warrant continued vigilance. The government budget will be in surplus in 2019, giving ample room to support activity and incomes of the most vulnerable in the event of a downturn. Business investment and government spending are supporting growth Non-mining business investment is picking up, and the decline in mining investment is set to bottom out. While favourable terms of trade and additional resource exports are supporting the economy, weak global trade has slowed total exports. Government spending, via the rollout of the services under the National Disability Insurance Scheme and public infrastructure works, is boosting aggregate demand. Housing prices have been falling steadily for more than a year, damping housing investment, construction activity and household consumption. Business and consumer confidence have weakened recently. Rising employment, on the other hand, is boosting incomes and consumption.

Australia House prices are coming down Index 2005Q1 = 100 160

The labour market is strong Billion AUD 31

← Real house prices Dwelling investment¹ →

150

29

% of 15-64 year-olds 79 ← Employment rate

6

76

5

75

4

74

3

73

2

72

1

130

25

120

23

110

21

100

19 17

71

2007

2009

2011

2013

2015

2017

7

Unemployment rate →

77

27

2005

← Participation rate

78

140

90

% of labour force 8

2010

2012

2014

2016

2018

0

1. Quarterly volumes, expressed at 2016/2017 prices. Source: OECD Economic Outlook 105 database; OECD Analytical House Price database; and Main Economic Indicators database. StatLink 2 https://doi.org/10.1787/888933934014

OECD ECONOMIC OUTLOOK, VOLUME 2019 ISSUE 1: PRELIMINARY VERSION © OECD 2019


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