Australia may extend its remarkable recession-free run out to 2020 as government and firms invest to cater for a rapidly-growing population, though trade tensions abroad have emerged as a new threat to the export-sensitive nation.
Economists polled by Reuters April 10-18 forecast Australia's A$1.8 trillion ($1.4 trillion) of annual gross domestic product (GDP) would grow 2.7 percent in 2018, down a tick from January's poll. The median call was for growth of 2.8 percent in 2019 and 2.7 percent in 2020, an outcome that would take Australia's stretch without a technical recession to 29 years.
This good fortune owes much to Australia's ability to attract skilled migrants and sustain population growth of 1.6 percent a year, twice the OECD average. In response, state governments have ramped up spending on infrastructure and firms are investing more in power, telecoms and commercial building.
Westpac estimates the total pipeline of projects under consideration is worth a cool A$587 billion, with spending on public transport more than doubling. That should help drive growth of 2.7 percent this year, though the bank then expects a slowdown to 2.5 percent in 2019 as weakness in wages weighs on consumer demand.
More optimistic is the IMF, which this week forecast growth of 3.0 percent for this year and 3.1 percent next. "Robust emerging market Asian GDP growth implies strong external demand for Australian commodity exports," the agency predicted. Yet it also warned an escalation in the trade spat between the United States and China would darken the outlook. That danger has been increasingly on the mind of Reserve Bank of Australia (RBA) Governor Philip Lowe who last week called it the main uncertainty for the economy.