Tuesday, 29 January 2013 08:53
Australia's mining construction boom is expected to peak in late 2013 and government spending cuts are making it harder to find a new driver of economic growth, economics advisory group Deloitte Access Economics says.
Deloitte says in its December 2012 quarter Business Outlook the mega-mining construction projects which accounted for much of Australia's production growth in recent years will likely peak in late 2013.
"The strongest contributor to Australian growth will peak, so the rest of the economy needs to fill a potential pothole," Deloitte said.
"But federal and state government cuts have deepened that pothole.
"And although interest rate cuts will help retail spending and housing construction more than is yet realised, that won't be enough of itself."
Deloitte said a lower Australian dollar was needed to ease pressure on the manufacturing, tourism and international education sectors, but so far that had not happened.
Consequently, growth was likely to continue to labour in the short term amid damage from the Australian dollar.
But on the positive side, global risks looked less dangerous, with China rebounding, US growth having the potential to surprise, and Europe's central bank doing the best that it can.
Deloitte said inflation, which had been boosted by the carbon tax and lower health insurance subsidies, was unlikely to drop back too much further, but was "less than scary" at present.
Deloitte said the carbon effect on consumer prices had been smaller than expected.
Low interest rates were likely to linger although the Reserve Bank of Australia may not cut rates again.
The high Australian dollar is expected to ceded some recently gained ground but most of the pullback is expected after mid-2014.
Deloitte said unemployment was likely to peak at 5.75 per cent in a year.
It said weak job growth would have already exacerbated unemployment if it had not been for the current accelerated pace of retirement for baby boomers.
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