INSIGHT

September / October 2016

Economic Overview

The global economy is continuing to grow though at a pace below average, and while several advanced economies have recorded improved conditions over the past year, conditions have become more difficult for a number of emerging market economies.

In China, the government continues with policies that are supportive of growth however the underlying pace of China's growth seems to be moderating. The US economy achieved below-expected growth in the second quarter of the year with gross domestic product (GDP) increasing by just 1.2% (annualised), as businesses remain wary of investing amid shaky global demand.

Global commodity prices are above recent lows, which is good news for the Australian economy though this comes on the back of substantial declines in prices over the past few years.

Nonetheless, Australia’s economic growth looks healthy relative to many of our trading partners. The economy grew by 0.5% p.a. in the June 2016 quarter, taking economic growth to 3.3% p.a. over the year to June, the best annual GDP growth in four years. Western Australia continues to be a weak spot, with state final demand falling by 2.5% p.a. during the quarter.

Australia’s economic growth looks healthy relative to many of our trading partners.

The continued fall in resource sector construction is being offset by public investment, particularly in transport infrastructure projects. Domestic demand remains healthy, and has benefitted from low interest rates, while exports are a beneficiary of the lower Australian dollar. Business investment however continues to be weak.

Wage growth is slow, and remuneration for employees rose just 0.5% in the June 2016 quarter and just 3.1% over the past year. On the plus side, the unemployment rate of 5.7% is down from 5.8% in June 2016.

As the economy continues to transition away from resource-sector investment, growth in the non-resource sector is expected to pick up, and the re-elected Turnbull Government is committed to reducing the Federal deficit, which will help to maintain Australia’s AAA credit rating.

Important Information:

Important Information:

The economic information was prepared from a variety of information sources, based on the information available at the time of publishing. We believe that the information in this report is correct and any opinions, conclusions or recommendations are reasonably held or made at the time of compilation, but no warranties are made as the accuracy, reliability or completeness. Neither Citigroup nor any of its subsidiaries accept liability to any person for loss or damage arising from the use of this information. This information is an indicative guide only. This material contains general advice only and does not take into account your individual objectives, financial situation or needs, and you should consider whether it is appropriate for your particular circumstances. Further information and our dispute resolution process is available at www.citibank.com.au or by phone on 13 24 84.

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