Most businesses and investors would be watching the international turmoil on stock markets generated by the US & China trade war with some degree of trepidation. As a relatively small economy on the world stage Australia will inevitably be affected by a full blown trade war between two of our major trading partners. How this might play out in terms of the domestic economy and whether there is a significant impact on local business remains to be seen.
The recent stock market volatility is an indication that not even the experts are sure what is going to happen. The only certainty is the lack of certainty. Despite this and the sluggish domestic economy for the first half of 2019 some recent data gives cause for optimism in the near future.
Firstly, the lower interest rates and reduced taxation rates adopted respectively by the RBA and the Federal Government have provided the right environment for a return to economic growth in the desired range of 2.5-3% according to several finance commentators.
Secondly, much improved housing data from Sydney and Melbourne in the form of higher auction clearance rates and increased building approvals signals a bottoming of the housing market decline. A healthy housing sector will boost spending and hopefully flow through to other important sectors such as retail and hospitality.
A recent assessment from CoreLogic head of research Tim Lawless stated that: “June housing market results present an early sign that lower mortgage rates and improved sentiment are already having a flow-on effect for housing market conditions in Sydney and Melbourne” and “National housing market conditions continued to improve through June, with a 0.2% fall in national dwelling values; the smallest month-on-month decline in the national series since March 2018”.
Thirdly, according to Deloitte the recent economic slowdown is not expected to last with the removal of negative factors which were contributing to lower growth. Most notably that lower interest rates and tax cuts should boost household disposable income and consumer spending.
Coupled with these factors a significant program of funded state infrastructure spending will support the construction industry through the back end of the housing downturn and boost employment across the East coast of NSW. Although there is a more positive outlook for consumer spending and business investment to support economic growth this financial year it is expected that such growth will remain at the lower end of historical levels.
Port Macquarie can expect road infrastructure projects such as Ocean Drive to begin soon, many private investment projects are continuing and CSU is moving ahead with the planned expansion of its’ campus. Our local housing market can also expect a boost following the more positive news coming from the Sydney market.
Despite the many local business success stories and our domestic economy being underpinned by sound government policy settings and a significant infrastructure spending program the potential impact of international trade unrest cannot be ignored.