Australia: Our outlook remains broadly positive - Wells Fargo

According to analysts from Wells Fargo, fundamentals of the Australian economy continue to improve and they have a positive outlook for the future as monetary policy remains accommodative.

Key Quotes:

“The ongoing slowdown in China and tepid global growth environment continued to weigh on GDP growth in Australia. Real GDP increased 0.5 percent in the second quarter (not annualized), just shy of consensus expectations for 0.6 percent increase, following a downwardly revised 1.0 percent increase in Q1. On a year-over-year basis, growth is still up 3.3 percent. The second quarter also marked 25 years that Australia has gone without a recession—a rare feat for a developed economy.”

“Government spending more than likely will not be able to support growth at this current pace over the long term.”

“On Monday, Australia’s Reserve Bank (RBA) opted to leave its cash target rate unchanged at 1.50 percent (bottom chart). After cutting rates in May and again in August, there had not been expectation of a move at this meeting. The meeting marked the end of an era for RBA Governor Glenn Stevens whose steady hand has guided policy in Australia since 2006; longer actually if you include the time he spent as deputy governor from 2001-2006. Current Deputy Governor Philip Lowe officially takes the reigns on September 18. The new governor steps into the job amid expectations that the RBA will eventually cut rates again, as policymakers there contend with underwhelming growth and slower household consumption, despite a tight labor market.”

“Our outlook remains broadly positive for the Australian economy, as monetary policy remains accommodative and underlying fundamentals continue to improve.”