Skip to content
American ExpressAmerican ExpressAmerican ExpressAmerican ExpressAmerican Express
  • Card Accounts

    • Your Account
    • Activate a New Card
    • Register for Online Services
    • Amex Mobile App Features
    • Add Someone to Your Account
    • Moving Abroad? Transfer Your Card

    Business Owners

    • Your Account
    • Activate a New Card
    • Register for Online Services
    • Membership Rewards & Travel
    • Add Someone to Your Account

    Other Accounts

    • American Express @Work
    • Online Merchant Services
    • International Payments for Businesses

    Contact Us

    • Support 24/7
    AustraliaChange Country
  • Personal Cards

    • View All Personal Cards
    • Learn About Credit Cards

    Popular Personal Cards

    • The Platinum Card
    • The Qantas Ultimate Card
    • The Explorer Card

    Cards for Business Owners

    • View all Business Cards
    • Popular Business Cards
    • Manage Your Business

    Corporate Cards

    • View All Corporate Cards
    • Corporate Payment Solutions
    • Corporate Purchasing Card
    AustraliaChange Country
  • Online Travel

    • Book Travel Online
    • Book Fine Hotels & Resorts
    • Book The Hotel Collection

    Travel Resources

    • Destination Guides
    • Travel Insurance
    • Using Your Card Overseas
    • Card Member Benefits
    • Find a Travel Service Office

    Business Travel

    • Global Business Travel Solutions
    • Small Business Travel
    • Foreign Exchange Services

    Travel Money

    • Travelers Cheques
    • Qantas Credit Cards
    • Travel Rewards Credit Cards
    AustraliaChange Country
  • All Insurance Services

    • Insurance Home Page
    • Insurance with your card
    • Other Insurance

    Travel Insurance

    • Travel Insurance
    • Multi-Trip/Annual Policy
    • Single Trip Policy
    AustraliaChange Country
  • Membership Rewards

    • Use Points for Gift Cards
    • Use Points for Travel
    • Rewards Changes

    Rewards Programs

    • Membership Rewards Cards
    • Qantas Frequent Flyer

    Card Member Offers & Benefits

    • Explore Card Benefits
    • Amex Experiences
    • Refer Friends. Earn Rewards
    AustraliaChange Country
  • Merchants

    • Merchant Home
    • Accept the Card
    • Manage Merchant Account
    • Contact Us and FAQs

    Corporations

    • Corporate Cards
    • Purchasing Solutions
    • Customer Centre
    • Global Business Travel Solutions
    • Meetings & Events
    • International Payments for Businesses

    Business Owners

    • Popular Small Business Cards
    • View All Small Business Cards
    • Manage Your Business
    • Business Credit vs Charge
    • How to Apply for a Business Card

    Global Network

    • Home
    • Issuers
    • Acquirers
    • Service Providers
    • Developers
    AustraliaChange Country
  • Contact Us
  • Log In
      • Your Account
      • Activate a New Card
      • Register for Online Services
      • Amex Mobile App Features
      • Add Someone to Your Account
      • Moving Abroad? Transfer Your Card
      • Your Account
      • Activate a New Card
      • Register for Online Services
      • Membership Rewards & Travel
      • Add Someone to Your Account
      • American Express @Work
      • Online Merchant Services
      • International Payments for Businesses
      • Support 24/7
      • View All Personal Cards
      • Learn About Credit Cards
      • The Platinum Card
      • The Qantas Ultimate Card
      • The Explorer Card
      • View all Business Cards
      • Popular Business Cards
      • Manage Your Business
      • View All Corporate Cards
      • Corporate Payment Solutions
      • Corporate Purchasing Card
      • Book Travel Online
      • Book Fine Hotels & Resorts
      • Book The Hotel Collection
      • Destination Guides
      • Travel Insurance
      • Using Your Card Overseas
      • Card Member Benefits
      • Find a Travel Service Office
      • Global Business Travel Solutions
      • Small Business Travel
      • Foreign Exchange Services
      • Travelers Cheques
      • Qantas Credit Cards
      • Travel Rewards Credit Cards
      • Insurance Home Page
      • Insurance with your card
      • Other Insurance
      • Travel Insurance
      • Multi-Trip/Annual Policy
      • Single Trip Policy
      • Use Points for Gift Cards
      • Use Points for Travel
      • Rewards Changes
      • Membership Rewards Cards
      • Qantas Frequent Flyer
      • Explore Card Benefits
      • Amex Experiences
      • Refer Friends. Earn Rewards
      • Merchant Home
      • Accept the Card
      • Manage Merchant Account
      • Contact Us and FAQs
      • Corporate Cards
      • Purchasing Solutions
      • Customer Centre
      • Global Business Travel Solutions
      • Meetings & Events
      • International Payments for Businesses
      • Popular Small Business Cards
      • View All Small Business Cards
      • Manage Your Business
      • Business Credit vs Charge
      • How to Apply for a Business Card
      • Home
      • Issuers
      • Acquirers
      • Service Providers
      • Developers
  • Contact Us
AustraliaChange Country
  • Card Accounts

    • Your Account
    • Activate a New Card
    • Register for Online Services
    • Amex Mobile App Features
    • Add Someone to Your Account
    • Moving Abroad? Transfer Your Card

    Business Owners

    • Your Account
    • Activate a New Card
    • Register for Online Services
    • Membership Rewards & Travel
    • Add Someone to Your Account

    Other Accounts

    • American Express @Work
    • Online Merchant Services
    • International Payments for Businesses

    Contact Us

    • Support 24/7
  • Personal Cards

    • View All Personal Cards
    • Learn About Credit Cards

    Popular Personal Cards

    • The Platinum Card
    • The Qantas Ultimate Card
    • The Explorer Card

    Cards for Business Owners

    • View all Business Cards
    • Popular Business Cards
    • Manage Your Business

    Corporate Cards

    • View All Corporate Cards
    • Corporate Payment Solutions
    • Corporate Purchasing Card
  • Online Travel

    • Book Travel Online
    • Book Fine Hotels & Resorts
    • Book The Hotel Collection

    Travel Resources

    • Destination Guides
    • Travel Insurance
    • Using Your Card Overseas
    • Card Member Benefits
    • Find a Travel Service Office

    Business Travel

    • Global Business Travel Solutions
    • Small Business Travel
    • Foreign Exchange Services

    Travel Money

    • Travelers Cheques
    • Qantas Credit Cards
    • Travel Rewards Credit Cards
  • All Insurance Services

    • Insurance Home Page
    • Insurance with your card
    • Other Insurance

    Travel Insurance

    • Travel Insurance
    • Multi-Trip/Annual Policy
    • Single Trip Policy
  • Membership Rewards

    • Use Points for Gift Cards
    • Use Points for Travel
    • Rewards Changes

    Rewards Programs

    • Membership Rewards Cards
    • Qantas Frequent Flyer

    Card Member Offers & Benefits

    • Explore Card Benefits
    • Amex Experiences
    • Refer Friends. Earn Rewards
  • Merchants

    • Merchant Home
    • Accept the Card
    • Manage Merchant Account
    • Contact Us and FAQs

    Corporations

    • Corporate Cards
    • Purchasing Solutions
    • Customer Centre
    • Global Business Travel Solutions
    • Meetings & Events
    • International Payments for Businesses

    Business Owners

    • Popular Small Business Cards
    • View All Small Business Cards
    • Manage Your Business
    • Business Credit vs Charge
    • How to Apply for a Business Card

    Global Network

    • Home
    • Issuers
    • Acquirers
    • Service Providers
    • Developers

AustraliaChange Country
Small Business Cards
Cards
American Express® Platinum Business Card
American Express® Qantas Business Rewards Card
American Express Business Explorer® Credit Card
View All Cards
Compare Cards
International Payments
International Payments
American Express AccessLine™
View All International Payments
Manage Your Business
Business Benefits
Why Amex for your Business?
Business Credit vs Charge
Business Rewards
Business Cash Flow Management
Business Travel Rewards
Existing Customers
Order Cards for Employees
Corporate Card Programs
Cards
American Express® Corporate Platinum Card
American Express® Qantas Corporate Platinum Card
American Express® Corporate Gold Card
View All Corporate Cards
Compare Corporate Cards
Payment Solutions
Buyer Initiated Payments
American Express vPayment™
View All Supplier Payments
International Payments
American Express AccessLine™
View All International Payments
Trend & Insights
Business Trends & Insights
Products & Solutions
Service & Expertise
Existing Customers
Trends & Insights
Trends & Insights
Insights and Inspiration to Help Grow Your Business
Security
Managing Supply Chain
Managing Data and Trends
Managing Risks
Growth
Expanding
Adapting to Change
Future Proofing
Funding
Managing Cash Flow
Financing
Becoming More Efficient
People
Leading My Team
Managing Talent
Collaborating
  • Trends and Insights
  • Growth
  • Future Proofing
Business Class

09 January 2018

Australian Economic Outlook 2018: Conditions Improving

Australian Economic Outlook 2018: Conditions Improving

Twitter Icon
Facebook Icon
LinkedIn Icon
Alexandra Cain

Writer, Cain Creativity, Inc.

Summary

Economic conditions are picking up in Australia after a prolonged low-growth period. The question is whether the unusual combination of low unemployment, low wages and low inflation could prompt cause for concern down the track.

Twitter Icon
Facebook Icon
LinkedIn Icon

The Australian economic outlook for 2018 is the most upbeat in years, with growth trending upwards, according to several measures.

This is largely due to the nation's successful transition from a reliance on mining investment to support growth to a more broad-based, diverse source of economic drivers.

According to the Organisation for Economic Cooperation and Development's (OECD's) November 2017 forecast, domestic conditions will “continue growing at a robust pace."

It notes: “Business investment outside the housing and mining sectors will pick up, with exports boosted as new resource-sector capacity comes on stream. The strengthening labour market and household incomes will sustain private consumption, and inflation and wages will pick up gradually."

On the back of this news, the OECD thinks the Reserve Bank of Australia will start raising the cash rate in the second half of 2018. The cash rate has remained at 1.5% since August 2015. The OECD believes this expectation has already been priced into a cooling housing market.

It wrote, “the fiscal position is sound and the government is committed to gradually close the budget deficit. In the event of an unexpected downturn, fiscal policy should be used to support activity and protect the incomes of the most vulnerable."

The OECD also noted that Australia's lengthy period of low interest rates led to a surge in house prices in major capital cities, contributing to a high level of household debt.

“To contain risks associated with potential large house-price corrections and financial stress, macro-prudential measures should be maintained. Australia is also vulnerable to “too big to fail" risks, due to its highly concentrated banking sector," the OECD report stated.

The view from here

The OECD's views are echoed by the central bank. According to the RBA's latest meeting minutes, “GDP growth [is] expected to increase and average around 3% over the next few years as the drag from mining investment diminishes and export growth continues."

The RBA believes public investment and non-mining business investment is still on the rise, noting, “in the medium term, consumption [is] expected to grow at around its average pace following the financial crisis."

Additionally, building construction is predicted to remain at robust levels through 2018 in light of a large pipeline of already-disclosed housing projects, although this is not forecast to add to the growth outlook.

At the recent Australian Business Economists Annual Dinner, RBA Governor Philip Lowe told the audience the global economy is still coming to terms with 'the new normal' following the financial crisis of 2007 and 2008.

“In a number of countries, low rates of unemployment are coexisting with below-average inflation. Low inflation, in turn, means low interest rates. Many investors judge that this unusual combination of low unemployment and low inflation can persist for quite some time – perhaps, that it is now normal," said Lowe.

“With inflation rates having surprised on the downside for a few years now, there is unusually low compensation for future inflation risk in many financial markets," he said.

Lowe told the audience that, “real income growth for many households has also been unusually slow in many countries. Not surprisingly, these households, including many here in Australia, wonder whether this slow growth in incomes is now the new normal, or whether in time it will pass. Much depends upon the answer to this, including households' appetite and ability to spend and borrow."

Although this may seem dour, in its most recent statement on monetary policy, the RBA's tone was relatively upbeat.

It stated that, “conditions in the global economy are continuing to improve. Labour markets have tightened and further above-trend growth is expected in a number of advanced economies, although uncertainties remain.

“Growth in the Chinese economy is being supported by increased spending on infrastructure and property construction, with the high level of debt continuing to present a medium-term risk. Australia's terms of trade are expected to decline in the period ahead but remain at relatively high levels."

Different perspective

While the OECD and RBA may be optimistic in their forecasts, their perspective is not universally shared.

According to the International Monetary Fund's October 2017 Global Financial Stability Report, high household debt and high house prices make the Australian economy vulnerable to economic downturns, something the OECD also acknowledged.

The report notes that both debt servicing pressures and debt levels in Australia's private non-financial sector are high.

However, the IMF qualified its statement around high household debt levels by noting, “…not all credit booms lead to recessions, it is interesting to compare the credit booms in economies most likely to face payment pressures with past experience … the boom in Australia is similar to the average of past credit booms that did not lead to a financial crisis…"

Nevertheless, it notes, “there is a particularly strong need for financial sector policy vigilance to guard against any further build-up of imbalances."

As this suggests, although there are signs the Australian economy is improving, debt levels and high house prices remain potential risks to an economy still recovering from the mining investment boom.

Key Takeaways

  • The Reserve Bank of Australia expects economic growth of 3% to persist into 2018.
  • The OECD says business investment is forecast to rise, except in the mining and housing sectors.
  • RBA Governor Philip Lowe says the key to future growth depends on whether real wages rise in Australia and around the world.
Twitter Icon
Facebook Icon
LinkedIn Icon
Want to Dig Deeper?

Get an American Express Card

  • Personal Cards
  • Credit Cards
  • Small Business Cards
  • Corporate Cards
  • Add Someone to Your Account

More Products & Services

  • Insurance
  • Accept the Card
  • Online Services
  • Book Travel
  • Business International Payments
  • Refer a Friend

Important Links

  • Frequently Asked Questions
  • Chip & PIN
  • ATM Locator
  • Accessibility
  • Safe and Secure

Company Information

  • About American Express
  • About American Express Australia
  • Careers
  • Contact Us
  • Site Map
  • Facebook
    • Personal Cards
    • Credit Cards
    • Small Business Cards
    • Corporate Cards
    • Add Someone to Your Account
    • Insurance
    • Accept the Card
    • Online Services
    • Book Travel
    • Business International Payments
    • Refer a Friend
    • Frequently Asked Questions
    • Chip & PIN
    • ATM Locator
    • Accessibility
    • Safe and Secure
    • About American Express
    • About American Express Australia
    • Careers
    • Contact Us
    • Site Map
    • Facebook

American Express
AustraliaChange Country
  • Connect with Amex on Facebook
  • Connect with Amex on Instagram
  • Tweet your questions to @AskAmex
  • Connect with Amex on LinkedIn
  • YouTube

  • Website Rules and Regulations
  • Trademarks
  • Privacy Statement
  • Security Alerts

Copyright © 2021 American Express Company