An escalation in geopolitical risks over the past quarter is creating increased uncertainty in the short term outlook of global economic growth.
The Australian economy continued to remain weak in Q2 2019 with GDP growth falling to 1.4 percent y/y.
Consumer and business confidence did not improve despite recent stimulus, but is expected to lift over the outlook period. Housing-related sentiment in September became relatively mixed after clear positive reactions to the rate cuts observed in June, July and August.
Strong nominal government tax receipts due to rising commodity prices and the extension of ATO’s Tax Avoidance Taskforce contributed to a near balanced Budget for FY19.
The unemployment rate in August increased slightly to 5.3 percent from the preceding month, despite employment growth of nearly 35,000 new jobs being created. Labour demand and supply indicators pointed to persistent spare capacity in the market.
US: Elevated uncertainty continues to drag on manufacturing and business investment in the US. The Fed expressed concerns over the challenge of incorporating trade policy uncertainty into the FOMC’s framework.
UK: While a legislation to stop a no-deal departure from the EU was passed, the possibility of a no-deal Brexit cannot be completely ruled out. Indicators pointed to a contracting production sector and deteriorating economic sentiment in the UK.
China: The Chinese economy has continued to face softening domestic demand. The automotive sector suffered further shrinkage in production and sales of both passenger cars and commercial vehicles.
Full details on the Australian and global outlook can be found in KPMG's Quarterly Economic Outlook.
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