Brokers subdued on 2008 outlook

IT'S that time of year when the crystal balls come out to see what 2008 holds in store, and most brokers are notably downbeat.

Brokers subdued on 2008 outlook

IT IS that time of year when the crystal balls come out to see what 2008 holds in store.

And most brokers are notably downbeat this year, compared to the stronger for longer predictions of last year.

Goldman Sachs JB Were's outlook is for Australia's economic growth to trend lower to 3.5 per cent in 2008 and 3.2 per cent the following year.

With tight financial conditions, Australia's economic performance is passing through the peak in the economic growth cycle.

"The positive stimuli that have driven the company profit environment in the past four years are waning,'' the broker claimed.

"We forecast Australia's terms of trade to peak in 2008 in conjunction with a declining profit share in 2007, ushering in a far more challenging earnings environment over the next two years.''

Still, GSJBW believes the US will avoid a recession.

"In the short term, however, the combination of dysfunctional credit markets and uncertainty over the spill-overs to global credit markets suggest maintaining a cautious approach to investing.''