China is likely to remain the key driver of Australia’s fortunes rather than a US led by president Donald Trump, according to a leading economist.
Deloitte Access Economics’ Chris Richardson doesn’t believe the Trump-factor will have a dramatic effect for the global economy.
“The headlines generated by president Trump may be far bigger than the policy changes he can get through Congress, we don’t see the US as a game changer,’ Mr Richardson says in his latest business outlook released on Monday.
He also expects that by the end of year, the Australian economy will pass the Netherlands to record the world’s longest ever spell without a recession.
Mr Richardson said the world was again paying “big bucks” for Australia’s exports, particularly coal and he believed China would be an ongoing good news story for the economy through 2017.
“Although that change in fortunes is very welcome, it probably isn’t permanent, mainly because China’s property boom will eventually lose its lustre,” the economist said.
The benefit from lower interest and exchange rates are also starting to lose steam at home and housing construction is nearing its peak, but there is a bunch of good news from a bumper wheat crop, an increase in gas exports and a lift in infrastructure spending by the states.
“That mix should keep the home fires of growth burning by enough to leave unemployment relatively steady, and by enough to see Australia sail past the Netherlands to record the world’s longest ever spell without a recession,” he said.
Economists more generally are fairly confident Australia will have bounced back from its shock quarterly economic contraction last year and extend its quarter of a century of endurance to break the record run of 26-and-a-half years without a recession held by the Dutch.
Mr Richardson expects the global economy will be slow to exit a period of low inflation, which will mean sluggish wage gains will linger in Australia for a while longer.
He expects Australian interest rates will stay on hold for now, but could start rising by late 2018 and by 2019 much of the world will be doing the same as the US continues to tighten monetary policy.