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BIS Shrapnel’s Long Term Forecasts: 2016-2031 report predicts that growth will continue to weaken as mining investment continues to decline, residential building “runs out of steam and falls sharply”, and as parts of non-dwelling building plateau. The reported noted that Australia faces “significant negative shocks” over the next few years before a recovery begins.
“Accordingly, we expect employment growth to slow and households to react to slower jobs growth and weaker residential property prices by reeling in discretionary spending," BIS Shrapnel senior economist Richard Robinson said. “Consequently, annual GDP growth is forecast to ease to 2.6 per cent in 2017/18 and slow to a weak 2.1 per cent in 2018/19. Meanwhile, soft growth in output, wages, employment and household incomes will continue to contain underlying inflation despite the fall in the dollar.”
Mr Robinson said the next three years are a continuation of “the hard yards” as the decade-long resources boom unwinds: “The boom involved a structural change away from balanced growth towards an economy servicing high levels of mining investment. There is a long way to go,” he said.
“This is just the beginning of Australia’s transition. Structural change takes time and effort.”
The senior economist warned that Australia faces a “hard road ahead”, and that the economy must absorb the shock of not only falling resources investment but a downturn in residential building as the capital city residential booms end and many markets move into oversupply.
“We expect residential commencements to fall by more than 25 per cent over the next three years,” he said, adding that the next stage for Australia will depend on its ability to rebuild non-mining industries.
“To rebuild Australian non-mining industries and realise growth potential will take the rest of this decade. Only then will output and employment growth pick up to realise Australia’s growth potential.”