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Economic risks remain 'tilted to the downside' for 2016

Economic risks remain 'tilted to the downside' for 2016

A global investment management group has published its 2016 outlook for the Australian economy.

Vanguard’s economic and investment outlook for next year highlighted the ongoing transition away from mining, with a volatile investment outlook on the cards.

“In Australia, risks remain tilted to the downside as the economy navigates a difficult transition from mining-led to broad-based growth,” the group said.

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“A cyclical economic recovery is likely to emerge over comings years as the drag from mining investment fades. However, in our view this is unlikely until 2017 at the earliest,” it said.

Vanguard believes policymakers are likely to continue to face difficulties achieving two per cent inflation over the medium term. However, the group noted that as of this month, some of the most pernicious long-term deflationary forces are beginning to moderate cyclically for the first time since 2006.

“Going forward, the investment environment is likely to be more challenging and volatile,” the group said.

“Investors with an appropriate level of discipline, diversification, and patience are likely to be rewarded over the next decade with fair inflation-adjusted returns.”

[Related: Outlook stable, but headwinds rising for Asia-Pacific banks]

Economic risks remain 'tilted to the downside' for 2016
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