How is the Australian economy tracking?
Overall the Australian economy is performing reasonably well, having seen growth of around 3% over the last year, ahead of most other developed economies.
Following the end of the mining boom there was fear that the economy would head into recession.
Key factors which have helped avoid this are:
- Interest rates falling
- The value of the A$ dropping
- The third and final phase of the mining boom; a surge in export volumes
However, the economy is facing some issues which the RBA is looking to tackle:
- Inflation is too low which leaves the economy at risk of deflation if there is a downturn in the economy. The RBA has cut interest rates in an effort to help deal with this. If inflation looks to be remaining below target for the foreseeable future and if a strong A$ is contributing to this, then we can expect to see at least one more cut again, likely in November.
- Globally interest rates are at record lows, which also puts upwards pressure on the value of the A$.
About the author
Shane Oliver, Head of Investment Strategy and Economics and Chief Economist at AMP Capital is responsible for AMP Capital's diversified investment funds. He also provides economic forecasts and analysis of key variables and issues affecting, or likely to affect, all asset markets.