Long Term Forecasts 2016 – 2031
Report Published: August 2016
FEBRUARY UPDATE NOW PUBLISHED!
We shouldn’t underestimate the magnitude of structural change which is impacting the Australian economy. The transition from an economy dominated by a decade-long mining boom to broad-based growth will be slow and difficult and still has a few years to run, particularly as the economy still needs to absorb further falls in mining investment. The process is underway, with the 28% decline in the Australian dollar over the past four years now starting to benefit the dollar-exposed sectors and regions. It will take time, but will eventually broaden through the economy. Growth will remain soft for another three years until non-mining business investment builds momentum to drive stronger growth from late this decade.
GDP growth over the next two years will remain in the narrow band around the 2.6% it averaged over the past four years. The pattern of growth will continue – weak growth in domestic demand, with a healthy contribution from net exports (strong resource exports, weak imports) – although some features with this weak domestic demand will change as the different cycles run their course:
- Dwellings investment, a key driver of growth over the past three years, will peak within a year and then decline for three years,
- Public investment started to recover in 2015/16 (after 5 years of decline), and will rise strongly over the next two years before plateauing,
- Mining investment is now well into the third year of an expected 5-year decline, with further significant declines to come over the next 18 months. This will see mining construction fall around 75% from the 2014/14 peak,
- Non-mining business investment is only slowly picking up, and after an expected stalling in 2018/19, is expected to strengthen from late decade.
With falling mining investment and subdued non-mining investment, the economy will stay soft for another few years before growth recovers. Fortunately, there is little risk of recession. The negative shock will be largely offset by growth in resources production, further strong growth in inbound tourism and students from overseas, residential investment (in the near-term) and rising public investment, the latter funded partly by asset sales. Consumer, spending will also underpin growth – households still have a healthy buffer of savings from which to draw to maintain modest growth in spending, and help offset weak wages and employment growth.
The next round of infrastructure and mining projects, plus another cycle in dwellings building (we will still have a deficiency of housing stock in NSW at the end of the current cycle), will underpin stronger growth from the end of the decade. We should also see reasonable growth in government investment and dwellings building in the early 2020s. These combined factors are expected to result in annual average growth over the six years to 2026 rising back to around potential growth of 3%.
It should be noted that the forecasts assume that US President Donald Trump does not enact any of his more extreme trade protection policies. They do however; represent a material risk which is discussed in the report.
A subscription to Long Term Forecasts 2016 – 2031 report includes:
- The main Long Term Forecasts 2016 – 2031 report
- Update Report in February 2017, providing new commentary and forecasts
- Access to our team of economists through to April 2017 to discuss implications of forecasts, methodologies etc.
- Individual chapters contain detailed coverage of specific areas along with a summary table of key drivers and directions:
- Outlook for the global economy, the Australian dollar and Australia’s external trade
- Population and the labour market
- Household income and consumer demand
- Government spending Investment – public, business and private
- Wages growth, price inflation and interest rates
Industry prospects, including the sub-components of the Manufacturing industry
The Long Term Forecasts 2016 – 2031 online service provides supplementary information in electronic format, including access to our website to download chapters in PDF format, and charts and tables in MS Excel from both the main report and February 2017 Update. The online service provides quarterly updates of forecasts of key variables – available after the release of the June and December quarter National Accounts releases. Online access may be shared with up to four other staff members for greater utilisation of the service.
UPDATE REPORT – FEBRUARY 2017
Adobe PDF and Excel document files for download by subscribers.
LONG TERM FORECASTS 2016 – 2031_UPDATE REPORT (pdf, 511 KB)
FORECAST TABLES UPDATE – FEBRUARY 2017
Excel document files for download by subscribers.
LTF – FEBRUARY 2017 UPDATE FORECAST TABLES (13.02.2017) (xls, 247 KB)
REPORT – AUGUST 2016
Adobe PDF document files for download by subscribers.
FULL REPORT: LONG TERM FORECASTS 2016 – 2031 (pdf, 2.53 MB)
EXECUTIVE SUMMARY (pdf, 241 KB)
OVERVIEW (pdf, 408 KB)
INTRODUCTION (pdf, 229 KB)
CHAPTER 1 – THE WORLD ECONOMY, EXCHANGE RATES AND TRADE (pdf, 422 KB)
CHAPTER 2 – THE LABOUR MARKET AND POPULATION TRENDS (pdf, 370 KB)
CHAPTER 3 – CONSUMER DEMAND FORECASTS (pdf, 388 KB)
CHAPTER 4 – GOVERNMENT SPENDING AND FISCAL POLICY (pdf, 430 KB)
CHAPTER 5 – INVESTMENT FORECASTS (pdf, 746 KB)
CHAPTER 6 – PRICES, WAGES AND INTEREST RATES (pdf, 372 KB)
CHAPTER 7 – INDUSTRY PROSPECTS (pdf, 435 KB)
CHAPTER 8 – OUTLOOK FOR THE MAJOR MANUFACTURING INDUSTRY SECTORS (pdf, 511 KB)
TABLES – AUGUST 2016
Excel document files for download by subscribers.
TABLES: LTF 2016 REPORT (xls, 1.59 MB)
CHARTS – AUGUST 2016
PowerPoint document files for download by subscribers.
CHARTS: LTF 2016 REPORT (ppt, 2.68 MB)