Bendigo Bank Economic Outlook

Starting with a self allocated mark of 50% accuracy relating to the ten predictions David provided us with in his 2017 presentation - and that two other predictions remain current and developing!

David pointed out that:

  • The Australian Government's debt levels put us in a better position than most of the other G20 countries
  • Australia's growing population was good for the economy although more was needed to be invested in infrastructure
  • Reducing levels of cash transactions had led to the rise of "Cryptocurrencies" such as Bitcoin (and around 1,500 others!) which had no inherent value other than the ability to sell them to others at a higher rate
  • Blockchain data widely used by Cryptocurrencies however could provide benefits in web data security  

He then suggested that in Australia: 

  • Inflation would remain around 2% but could rise off the back of tariff and oil price increases
  • The jobs outlook would remain strong, particularly in health and education, with low national unemployment as the participation rate increases.  This is likely to continue for the rest of 2018-19 although labour underutilisation, would contribute to stagnant wages growth which was not keeping up with inflation and could stifle consumer spending and hinder retailers and other markets;
  • Interest rates would remain on hold, with a slight chance of an increase if economic conditions improve dramatically.  However, high household debt will make it difficult for the Reserve Bank to raise interest rates, particularly with general housing price declines since the start of 2018;
  • The housing market would remain relatively flat for homeowners and decline in the higher density market 
  • The share market could rise if the economy continues to improve and investors move away from the residential housing market
  • An Australian recession looked unlikely due to current levels of investment in infrastructure and the likely drop in the A$ in the event of a US recession (more likely) would act as a cushion
  • Uncertainty around the value of the Australian dollar would remain, with the US, China and the EU potentially engaging in tariff increases and trade wars
  • Victoria's economy would continue to grow due to population growth and subsequent employment growth due to more people gaining qualifications and upgrading their education levels, and a diversified economy; 

and in the rest of the world:

  • Brexit would continue to cause trouble
  • China would slow to 6.25% growth

David also responded to a number of important questions from the floor at the end of his presentation:

  • Why do banks increase interest rates when the Reserve Bank does not? David said that off-shore borrowing was the major influence and warned that the recent tax cuts in the US could lead to higher interest rates.
  • is there a limit to how much population the world can handle? David suggested that population growth was in fact slowing (Japan in negative growth) and that he had faith that new technologies (eg recycling, power production) would provide a solution to diminishing resources.
  • What impact would US/China trade wars have on Australia? David hoped that both countries would see the folly in such activity but suggested that escalating trade wars would lower economic growth, and if other countries followed suit it could lead to a global depression.

In finishing, David left us to ponder another question - what will we be doing at work in the future? Would technologies such as driver-less cars/trucks/aircraft significantly change the structure of the workforce?  

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