What lessons can we learn from 2017?
That’s a question asked in Commsec’s “The Big Issues” report – which highlights the issues that are expected to influence our economy over the next 12 months.
It is interesting – and perhaps even instructive – to rewind over the past year and assess what we had on the radar screen in December 2016.
12 months ago, looking ahead into 2018, they highlighted eight issues.
1. The first issue was “President Donald Trump”.
And they believe this indeed was a good choice.
From North Korea to tax reform, the choice of a new Federal Reserve chair and various changes in White House appointments, President Donald Trump was very much the focus of the financial markets.
And this was just year one of the President’s 4-year term.
Clearly the US President will dominate again over the coming year, thus our decision to put Donald Trump back on the Big Issues list for 2018.
2. They also posed the question:
“Inflation at an inflexion point?”
But rather than being at an inflexion point as most central bankers expected (or hoped for), inflation remained low across most advanced nations.
3. Number three on the Big Issues list for 2017 was “Fiscal versus Monetary Policy”.
The good news is that many governments did indeed focus on ramping up infrastructure spending in 2017, providing support for monetary policy and serving to lift momentum for economies.
Indeed Australian state and federal governments were active in announcing projects.
Infrastructure spending will prove pivotal in taking over from home building in driving the Australian economy in coming years.
4. Housing has also dominated our ‘Big List’ for a few years.
Last year they questioned: “Housing: Hard landing or soft landing?”
This issue was another to make a return for 2018.
While plenty of people are worried about the outlook for housing, the actual issue of the ‘landing’ has been regularly been pushed out.
Of course the further the landing is pushed off into the distance, the more it looks like a ‘soft landing’ will prevail.
5. Housing Affordability
Another housing issue: “Housing Affordability” was on the Big Issues for 2017, and indeed it generated plenty of interest and discussion on the topic.
Gradually more observers came to realise that housing affordability was an issue that tended to emerge every decade or so when home prices were on the rise.
Record affordability of food, clothing, cars and home appliances means that there are still plenty of dollars to meet housing needs.
6. The global political environment.
The good news is that while there were a raft of elections held in 2017, especially in Europe, the results didn’t serve to ignite fresh economic turmoil or instability on financial markets.
The political environment was indeed a key issue for investors in 2017.
While they nominated “The state of the job market” as a Big Issue for 2017, the focus was largely on weak wage growth – not just in Australia, but across advanced nations.
No surprise then that weak wage growth is on the Big Issue list for 2018.
7. China is never too far away from our consciousness.
The issue we nominated as a Big Issue for 2017 was “The economic baton change in China”.
This issue was very much in the Reserve Bank sights at the end of 2016.
The good news is that the transition from exports and manufacturing to household spending continues smoothly.
You may also be interested in reading the other articles in this series:
Source: CommSec Big Issue Report 2018
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