False dawn for rebalancing of Australian economy?

SYDNEY – Commenting on fourth quarter growth numbers for 2015, the investment management and research firm AllianceBernstein (AB) says it believes jobs numbers and GDP statistics in Australia are set to unwind through the first half of 2016. “Disappointment may well replace that sense of relief,” AB says.

Australia’s growth performance of 3% for 215 is close to the top of the OECD table, suggesting that the rebalancing task away from mining towards non-mining as a vehicle for growth is “proceeding nicely”, AB says.

“While net exports made a healthy contribution to growth (as the need for imported capital goods falls) the two other big contributors – public spending and inventories – tend to be volatile and are unlikely to be repeated.

“Meanwhile, private sector demand was almost flat over the year, rising just 0.3% - the weakest since the GFC. Business capital spending continues to be a huge drag as the mining boom unwinds.

“Household spending via both the housing construction upswing and surprisingly strong consumption, has been just strong enough to provide an offset.

“Household spending appears to be on the cusp of shifting. The leading housing indicators peaked some time back, and construction activity will likely top out shortly.

“Consumption spending has held up despite low wages growth, but that is because of a large decline in the savings rate. That, to us, seems unsustainable.”

AB says national disposable income per capita continues to go backwards, recording a decline of 0.4% in the quarter and 2.4% on-year in 2015, while Australia’s current account deficit widened to 5% of GDP.  www.alliancebernstein.com.au (ATI).