Experts suggest that Australia’s 2015 economy will be at a critical stage. The country has been struggling consistently with the negative impact of a slowdown in mining development, declining commodity prices, and renewed fiscal restrictions. According to Goldman Sachs, Australia could be heading towards the perfect storm in 2015.
Australia's Growth is Slowing
Goldman’s chief economist Tim Toohey contacted investors in December and noted that Australia’s challenges were mounting. In 2015, Australia will have to contend with a poor investment environment and lower levels of housing investment. Both of these factors have been important in offsetting the slump of the mining sector.
According to Goldman Sachs, Australia's GDP in 2015 should fall to 2%, well below the previous estimate of a 2.9% rise. The bank has suggested that the recent slump in mining-based investments will continue to have a significant impact on the country, dragging the economy down. An economic turnaround will be up to consumption and exports.
The Q3 2014 GDP release came amidst numerous reports of a sluggish and worrisome domestic economy. According to the economic report, Australia was taking far longer than had been expected to steady itself after mining investment growth fell off. Although the expected growth rate for the third quarter was around 3.1%, the economy only expanded by 2.7%, according to CNBC.
Senior economist and director for the national bank of Australia, Mr. David de Garis, announced that GDP data fairly reflects the economy. However, additional weaknesses exist. Until March of 2016 (when interest rates may rise), Australia will have to adhere to a strict monetary policy.
At the same time as all of these reports, the Australian Treasurer, Joe Hockey, has commented that he believes a weaker Aussie dollar could benefit future growth. In a report on ABC, Hockey rejected the notion that negative national income spanning two quarters will send Australia into a recession. At a press conference, Hockey announced that Australia export growth is strong and that the drop in the dollar was welcoming news.
The treasurer commented that carbon tax repeals (Australia was the first major country to denounce anti-business laws that taxed energy production) and mining are still capable of boosting the Australian economy. The Australian people believe that the carbon tax increased their energy and living costs, which is why they dumped it. The Australian people were right – that is exactly what that tax did in addition to hurting employment.