HSBC Australia chief economist Paul Bloxham has said that a wave of global growth is gaining momentum and should support Australia’s economy in a number of ways.
In his latest research update, Mr Bloxham predicts GDP growth to increase from 2.4 per cent in 2017 to 3.2 per cent this year, outstripping market estimates of 2.8 per cent.
“This outlook is underpinned by HSBC’s above-consensus China growth forecast (6.7 per cent versus 6.4 per cent) and our view that the lift in local business conditions will continue to support hiring, which, as it tightens the labour market, should drive a pick-up in wage growth,” the chief economist said.
“The lift in wage and jobs growth is expected to support stronger growth in household incomes, consumer spending and tax revenues.”
While he expects to see house price growth slowing in 2018 after a five-year boom, Mr Bloxham is not forecasting any significant price falls as the market is supported by strong population growth, some expected loosening of prudential settings and mortgage rates that are still historically low.
But the clearest signs of improvement in the economy are in the labour market. Mr Bloxham is confident that Australia will reach “full employment” this year, which should support a rise in wages growth.
He said: “We also expect growth in 2018 to be the most broad-based across regions and industries in more than a decade, which should see increased demand for skills across a wide range of areas, supporting wages growth.”
HSBC expects the RBA to lift its cash rate in 2018, with a first hike pencilled in for Q2.
“With hikes expected, we see the AUD rising to US 84 cents in 2018,” Mr Bloxham said.
[Related: Housing bubble beginning to deflate: UBS]