Growth prospects discouraging: Westpac

Economic growth in 2018 will face headwinds in slowing exports, weak wage growth and slower housing construction, says Westpac.

Westpac’s Bill Evans said, there were concerns for growth beyond 2017 due to a contraction in housing construction, slowing exports and weak wage growth.

Economic growth of 3.0 per cent is still likely in 2017 but prospects for 2018 are “discouraging”, Westpac says.

The Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, fell in April. The index has still been at or above trend for nine consecutive months, indicating economic growth in 2017 will be close to the Reserve Bank’s forecast of 3.0 per cent, Westpac chief economist Bill Evans said.

Nonetheless, Mr Evans said, there were concerns for growth beyond 2017 due to a contraction in housing construction, slowing exports and weak wage growth. “Prospects for growth in 2018 look discouraging,” Mr Evans said.

“Prospects for an offsetting boost from household spending and business investment are not encouraging given the ongoing negative feedback loop from weak labour incomes to consumption and sales.”

The six-month annualised growth rate fell from 1.11 per cent in March to 0.92 per cent in April.

Mr Evans reiterated that the Reserve Bank is set to hold rates steady when it next meets on June 6, as it assesses developments in the housing and labour markets.

AAP