Overview
The Australian economy is currently being buffeted by a number
of conflicting factors.
Low interest rates have encouraged moderately strong credit
growth that has translated into a surge in both house prices and
residential construction. In turn higher house prices combined with
higher share prices have made consumers feel wealthier, supporting
consumption. The flow through effects into the broader economy,
while modest to date, should continue while credit growth remains
elevated. In addition, the recent fall in the AUD will begin to
provide some assistance to the beleaguered import competing
industries.
These positive developments are now being challenged by a sharp
fall in commodity prices as signs emerge that China's debt
fuelled property (and infrastructure) boom have peaked. Given the
significant contribution made by mining to Australian economic
output, this will inevitably create a drag on growth.
