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Quarterly Economic Outlook: Global and Australian Forecasts – April 2018
Quarterly Economic Outlook – April 2018
While the threat of a trade war lurks ominously, global economic conditions remained strong in the first quarter of 2018 and this momentum is expected to continue through the year. Importantly, this growth is widespread across most markets.
In the April Quarterly Economic Outlook, KPMG Economics has revised its forecast of global growth, with real GDP now expected to be 3.8 percent for both 2018 and 2019.
Closer to home, the 'outlook' forecasts real GDP for the Australian economy to grow at around 2.9 percent for FY2018 and 2.6 percent for FY2019.
Global outlook
- Global economic conditions remain strong as we head into the second quarter of 2018 and this momentum is expected to continue through the year.
- Importantly, and different to recent years, is that this growth has also been widespread – and this pattern of widespread growth is forecast to be maintained into the short term.
- The major current development in the world economy at the moment is the imposition of tariffs by the United States on steel and aluminium imports from 23 March 2018 and the potential application of tariffs on goods from China.
- Major advanced economies, led by Japan, Korea and Germany, have recorded stronger-than-expected growth in the last quarter. Although this momentum is projected to moderate, the current economic outlook for 2018 is still strong.
- Emerging market and developing economies including China, India and South Africa have also registered strong growth benefiting from increased world trade and a pick-up in investment.
- On balance, global growth is likely to remain robust going forward and KPMG Economics has revised up its forecast of global growth, with real GDP now expected to be 3.8 percent for both 2018 and 2019.
Australian outlook
- The Australian economy grew by 0.4 percent q/q (seasonally-adjusted) in the December quarter of 2017 following an upwards revised 0.7 percent q/q growth in Q3 2017. On an annualised basis, the Australian economy grew at 2.4 percent y/y slower than the upwardly revised 2.9 percent y/y in Q3 2017.
- Household consumption expenditure was strong contributing 0.6 percentage points to GDP growth while government expenditure added a further 0.5 percentage points. Gross fixed capital formation contracted as private investment declined 2.1 percent, detracting 0.4 percent from GDP growth. Exports of goods and services declined 1.8 percent while imports of goods and services rose 0.5 percent. In aggregate, net exports had a negative contribution of 0.5 percent towards GDP growth.
- Headline inflation rose 1.9 percent y/y in Q4 2017 (0.6 percent q/q) with underlying inflation at around 1.8 percent y/y (trimmed mean basis). The RBA’s official cash rate (OCR) is accommodative at 1.5 percent and is expected to remain so for 2018.
- Looking ahead, KPMG Economics forecasts real GDP for the Australian economy to grow at around 2.9 percent for FY2018 and 2.6 percent for FY2019.
