Please find below a spectacular chart pack from Westpac’s economics team, which provides detailed analysis of the outlook for the Australian economy at both the national and individual state levels.
A summary of the national economic outlook is provided below:
The Coast-to-Coast Report highlights how the Australian economy has lost considerable momentum through the second half of 2012. In the first half of 2012 annualised growth momentum was around 3.5% while in the second half it slowed to 2.5%. On average we expect growth to slow from 3.6% in 2012 to 2.5% and 2.3% in 2013 and 2014 respectively.
The key theme will be the inability of demand, including government, to adequately fill the gap in demand created by the slowdown in mining expenditure over the course of 2013 and 2014. Indeed this report highlights that mining investment growth already slowed markedly in the second half of 2012.
The mining boom is expected to peak in 2013 with mining spending swinging from a contributor to growth in 2012 to a drag in 2014. The expectation from the authorities is that non mining investment and household spending will respond to lower interest rates and accelerate to fill the void. Some evidence has been building with consumer confidence rising by 11% since October although business confidence has been flat.
Investment, employment intentions and house prices appear to have stabilised but manufacturing, in particular remains weak. Households are concerned about job security. Recent strong growth in equity markets has allayed concerns amongst consumers around the global economy while businesses are responding to soft demand with plans to raise efficiency levels and limit expansion plans.
With 2013 being a Federal election year both households and business are impacted by political uncertainty. Indeed, political issues have dampened confidence, both business and consumer, through 2012. That is unlikely to pass until well beyond Election Day on September 14 as businesses, in particular, scrutinise the policies of whichever party is elected with, hopefully, a clear majority.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.