Geo-political uncertainties are likely to continue being a drag on business investment and global growth and to increase downside risks to the global economy.
The Australian economy continued to remain weak into the first quarter of 2019 with GDP growth dropping to 0.4 percent quarter-on-quarter and 1.8 percent year-on-year.
The centrepiece of the Budget 2019-20 is an additional $158 billion tax cut for low and middle income earners, which has now been legislated following the recent Federal election.
The labour market in Australia remains healthy with nearly 300,000 new jobs (seasonally adjusted) added to the economy over the 12 months to June 2019.
However, forward indicators signal soft labour demand while spare capacity remains.
The global economy is in the late stages of the current cycle with GDP growth expected to increase marginally, driven mainly by emerging market and developing economies. World economic growth is now forecast to be around mid-3percent’s towards 2023.
With the appointment of Boris Johnson as the UK Prime Minister there is now an increased likelihood of a ‘hard’ Brexit given his election pledge that the UK will leave the EU by the end of October “deal or no-deal”.
The trade tensions have taken a toll on the Chinese economy with both exports and imports declining in the first half of 2019, while domestic demand has also weakened.
Japan experienced subdued growth and weak inflation despite very low levels of unemployment. However, the BoJ announced in June that it continue to keep interest rates at current levels and continue with its program of QE for the foreseeable future.
Full details on the Australian and global outlook can be found in KPMG's Quarterly Economic Outlook.
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