· GREAT AUSTRALIAN DREAM Part 1: What happened?
· GREAT AUSTRALIAN DREAM Part 2: Working towards what, exactly?
· GREAT AUSTRALIAN DREAM Part 3: Home ownership? Tell ‘em they’re dreaming’
· GREAT AUSTRALIAN DREAM Part 4: Just how golden are the golden years?
• GREAT AUSTRALIAN DREAM Part 5: Dead or alive in the 21st Century?
It’s good new for the economy but bad news for borrowers.
There’s not going to be an interest rate cut next week and the chances of a reduction next year are slim as the non-mining parts of the economy are expected to pick up pace.
All 14 economists surveyed by AAP say the Reserve Bank of Australia will not cut the cash rate at its board meeting on Tuesday.
Only eight of those surveyed expect a rate cut next year.
The mining and resources investment boom is at, or near, its peak and other parts of the economy are expected to pick up pace and have a more significant role in driving the Australian economy.
We expect the housing boom to continue as low interest rates continue to provide support.
Citigroup head of economics Paul Brennan said there is evidence that the Australian economy is starting to rebalance, helped by recent rate cuts.
“The RBA’s previous assessment that the influence of previous interest rates cuts working through the economy still holds true and there is data to show that domestic expenditure is slowly improving,” he said.
“Housing and equity markets and measures of sentiment have either remained largely stable or strengthened further.”
September quarter capital expenditure figures, released on Thursday, were stronger than expected, which Mr Brennan said shows mining investment will still be quite strong for some time to come.
“Mining capex plans are not falling off a cliff while the capex plans of non-mining companies are starting to firm,” he said.
“Information from other business surveys also suggests some resilience in overall business investment and this resilience could be sustained if the recent rebound in confidence is sustained.”
HSBC chief economist Paul Bloxham said a lower exchange rate will also help the domestic economy and save the RBA from cutting its rate again.
In the past six weeks the Australian dollar has steadily fallen, losing six US cents since October 25 to its current level just below 91 US cents.
“RBA governor Glenn Stevens has suggested that it is his judgement that the Australian dollar is currently above levels that we would expect to see in the medium term,” Mr Bloxham said.
“Our own view is still that the Australian dollar will be around 90 US cents at year end and will fall modestly through 2014 to 86 US cents.”
As new mining and resource projects come into production, mineral exports and housing will be the main drivers for the Australian economy in 2014, he said.
“We expect the housing boom to continue as low interest rates continue to provide support,” Mr Bloxham said.
“The recent pick up in consumer confidence is expected to translate into a modest pick up in household consumption.”