Australia Economy Update

Australia’s state of property markets and economy

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Australia’s overall economy is growing at an almost stalling speed with its GDP growing only about 1.8 percent in 2017 with a possible acceleration of about 2.5 percent in 2018. This seems inadequate to address the country’s current unemployment rate.

The high-rise apartment boom appears to be coming off the boil. There is a decline in higher-density approvals in most major cities, in particular for Melbourne and Brisbane CBD’s where new apartment supply is running ahead of demand.

Housing market values in Sydney, Melbourne, Brisbane and Adelaide rose but most values elsewhere fell, with the exception of Hobart, which has been rather strong in recent times.

Housing finance and credit data show that investor interest in residential properties has started to drop off. It is still unknown if investors will return to residential property once rationing of credit eases.

The household sector is growing at about 2 percent which presently comes from running down savings instead of increasing wages.

Our housing market is dependent on consumer confidence. Low consumer confidence shows that such buyer reluctance may continue to run down the savings rate, rather than increase overall wages. This continuous low inflation or low growth environment challenges the RBA and government with the current fiscal deficits, high household debt and low cash rates.

While our economy has grown its 103 consecutive quarter in the first quarter of 2017, it has also shown that Australia’s growth drivers are in a very fragile state.

Our annual growth is performing below the long term average, similar to the recent lower growth environment of the developed world.  Growth in demand is strongest in NSW and Victoria while it is weakest in Western Australia. These are reasons why the RBA is comfortable to maintain interest rates at very low levels.

Overall, we currently have low inflation, low economic growth, low interest rates and low wages growth but the Australian economy remains sound. For more information about investments in Australia, contact a Specialist to discuss your particular circumstances.

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Chan & Naylor Group has nationwide offices in Brisbane and Capalaba in Queensland, Melbourneand Moonee Ponds in Victoria, East Perth in Western Australia, and BankstownParramatta,PymbleNorth Sydney, and Sydney in New South Wales.

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