What is rarely mentioned is that if the all of the downside events do play out the declining Aussie dollar would bear the brunt of the adjustment, quickly declining to 40 to 50 cents.
Given that the Reserve Bank seems unwilling to cut interest rates further, a strong increase in business investment over the next couple of years admittedly doesn’t seem all that probable.
Regardless, nothing is all good or all bad, and here are a few possible upside risks for the economy.
1 – Manufacturing jobs increase
2 – Unemployment rate drops towards 4 per cent (& wages breakout)
The unemployment rate has declined from 6.3 per cent to 5.7 per cent at the latest reading.
A sharp decline towards 4 per cent isn’t in anyone’s base case, but it’s not out of the question either according to the Reserve Bank’s modelling.
3 – Mining investment bust ends
4 – LNG price increases 50pc
5 – Property prices rise 12pc in 2017, unleashing a wealth effect
The wealth effect on household expenditure doesn’t seem all that likely, but stranger things have happened, especially with household wealth passing a record $9 trillion last year.
6 – Infrastructure booms
7 – China unleashes its capital account
8 – Tourism & education boom
Tourism and international student arrivals are already booming, and arrivals could rise 10 to 15 per cent over the next year following a streamlining of student visa rules, helping to send annual population growth back towards 450,000 per annum. Chinese visitor spend is also already exploding.