Election to give short-term boost but Australian economy ‘vulnerable’
SYDNEY - In a comment on the impact of the Federal Government's re-election in Australia, Jeremy Lawson, Chief Economist and Head of Aberdeen Standard Investments Research Institute, says the Australian economy remains one of the more vulnerable in the world.
"Although the Government has few plans to properly address the country's long term challenges, the Coalition's return could boost the economy in the short term," says Lawson.
"Corporate Australia and SMEs were opposed to much of Labor's policy agenda, creating scope for business sentiment to improve in the wake of the election.
"The Government's proposed tax cuts are regressive and will likely have a low multiplier, but they will support consumption growth at the margin against a backdrop of weak real wage growth.
"Meanwhile, the struggling housing market will receive a fillip from changes to negative gearing being taken off the table, and the new proposed Federal subsidy for first home purchases.
"Excessively low inflation still warrants policy easing and our central view is still for two cuts this year.
"However, the election result tilts the near-term risks to the upside of that baseline view and housing, consumption and business investment dynamics will bear very close monitoring.
"That said, it remains very unlikely Australia will be able to sustain a policy tightening cycle during the current expansion, and the country remains one of the more vulnerable in the world to the end of the current global expansion given the scale of its household imbalances and sensitivity to commodity demand." (ATI).