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Quarterly Economic Outlook: Global and Australian Forecasts – December 2017

Quarterly Economic Outlook – December 2017

As 2017 draws to a close, the outlook for the global economy remains relatively strong, following an improved Q3 2017. The Australian economy grew by 0.6 percent quarter on quarter (seasonally-adjusted), with growth being relatively broad-based across 17 of 20 industries. This Quarterly Economic Outlook report by Brendan Rynne dives into the results from labour markets, the impact of the US dollar appreciation, how the Australian budget is tracking, household consumption and other core measures.

Brendan Rynne

Partner, Chief Economist

KPMG Australia


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Global outlook

  • Global economic conditions have improved and the outlook for the global economy remains relatively strong.
  • KPMG Economics has revised its forecast of global economic growth in 2017 with real GDP at 3.5 percent, lifting to 3.7 percent in 2018.
  • Labour markets are close to full capacity in a number of key advanced economies with unemployment rates close to their natural rate (or potential).
  • With the notable exception of the U.K., both headline and core inflation remain soft in advanced economies, with inflationary response to capacity constraints seemingly delayed.
  • The U.S. dollar has appreciated slightly against a range of currencies following expectations of tighter monetary policy and fiscal stimulus, while the Sterling has experienced the largest decline against the Euro over the quarter as a consequence of Brexit risks and uncertainty, with many economists and analysts still bearish on the outlook.
  • The Federal Open Market Committee (FOMC) raised the Federal Funds Rate (FFR) by 25bps in December as well as raising their economic growth forecast for 2018. A further 75bps rise in the FFR is expected in 2018.
  • In Q3 2017, the U.S. economy grew at an annual rate of 3.3 percent (seasonally-adjusted), while GDP growth in China grew 6.8 percent year on year in Q3 2017 and Japan’s economy grew for a seventh consecutive quarter with GDP coming in at 0.6 percent (seasonally-adjusted) quarter on quarter (2.5 percent year on year).

Australian outlook

  • The Australian economy grew by 0.6 percent quarter on quarter (seasonally-adjusted) in the September quarter 2017, with growth being relatively broad-based across 17 of the 20 industries, although household final consumption expenditure grew by only 0.1 percent quarter on quarter.
  • Labour market conditions improved with the unemployment rate steady at 5.4 percent (seasonally-adjusted) and labour force participation up 0.3 percentage points to 65.5 percent in November 2017.
  • MYEFO shows the budget remains on-track to achieve a surplus in 2020-21.
  • Australia posted a current account deficit of $9.13 billion in Q3 2017, equivalent to 2.1 percent of GDP, although the trade surplus narrowed to $0.1 billion in October 2017.
  • The Australian dollar has depreciated slightly against the U.S. dollar since Q3 2017, and is currently trading at around USD 0.76c.

Economic Outlook

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