Dr Shane Oliver, Head of Investment Strategy and Chief Economist, AMP Capital Investors began the year with a list of lists.
Clearly he is optimistic for the world economy as well as our local economy.
Here are his five reasons not to be too bearish on Australia:
- Trade is likely to steadily boost growth as resources export volumes pick up in the years ahead (after all the investment and helped by a stronger global economy). Exports to China are growing 55% year on year.
- Slowing mining investment will allow a more balanced economy after the unbalanced “two speed economy“ years.
- Interest rates are at generational lows.
- The falling $A is providing a boost to growth.
- A housing construction recovery is underway with, eg building approvals around past cyclical highs.
Source: Bloomberg, AMP Capita
He continues by saying:
There are signs of life in consumer spending with retail sales looking stronger, consumer confidence off its lows, household wealth up and the savings rate very high at around 11% (meaning it has scope to fall a bit to provide a boost to consumer spending growth).
Dr. Oliver also warns about the Key Risks for 2014
- Too much exuberance. After the strong run in share markets of the last two years, short-term investor confidence is at levels often associated with corrections.
- Bond yields could surge higher and destabilise growth assets. This could occur in response to stronger than expected growth and/or inflation and/or an accelerated switch out of bond investments by investors.
- The Eurozone crisis could return as growth there remains low and with bank stress tests due later in the year.
- China’s growth stabilisation could prove fleeting.
- The pick-up in non-mining sector growth in Australia may not be strong enough to offset the slowdown in mining investment and budget cutbacks in the May budget.
- Factor X – something can always come from left field.