Australia's national accounts for the March quarter confirmed that we are continuing to experience relatively subdued economic conditions. GDP growth was 2.5% for the year and according to Andrew Hanlan, Senior Economist with Westpac this rate of growth will continue throughout the remainder of 2013 and 2014. This will place pressure on employment with the unemployment rate expected to rise to 6.2% by mid 2014.
Westpac's June 2013 Market Outlook cites the following as the major influencing factors:
- global growth remains below trend
- the Australian mining investment boom has peaked while conditions in other major sectors are being held back by the continuing strength in the Australian dollar and the propensity for households to reduce debt rather than to increase spending. Housing construction is flat and business investment is down by 4.3%.
- public sector demand (23% of the economy) is contracting as governments seek to balance their budgets
ut there are some positive signs too. A strong upswing in exports is under way: export volumes are up by 8% over the year with resources exports up by 13.2%. Interest rates have been reduced over the year and this is beginning to impact new residential building activity. However, more significantly the larger home renovation sector continues to weaken.
Interest rate cuts have had limited impact to date. Those with mortgages are taking advantage of the lower interest costs to pay down debt more quickly, rather than to increase spending. This reflects relatively low consumer confidence influenced by the soft labour market and moderating wage incomes.