2016 Budget — Economic outlook
The 2016 Australian Government Budget is framed in a context where the Australian economy is entering its 26th consecutive year of economic growth and is forecast to strengthen over the forecast period despite continuing uncertainty internationally. As our economy transitions to broader‑based growth, near‑term economic activity will continue to be supported by household consumption, dwelling investment and exports, while falling mining investment is expected to continue to detract from growth over the forecast period.
Expectations for global growth have moderated since the 2015‑16 Mid‑Year Economic and Fiscal Outlook (MYEFO). The global economy is nevertheless forecast to grow by 3.75 per cent in 2016 and 3.5 per cent in 2017 but downside risks are increasing. That said, the overall outlook for growth in Australia's major trading partners is expected to be stronger than global growth at 4 per cent in each year of the forecast period, unchanged from the 2015‑16 MYEFO.
Domestically, the transition to broader‑based growth is well underway, supported by historically low interest rates and a lower exchange rate. Real GDP is forecast to grow by 2.5 per cent in both 2015‑16 and 2016‑17 before strengthening to 3 per cent in 2017‑18, little changed from the outlook at the 2015‑16 MYEFO.
By lowering borrowing costs for households and businesses, historically low interest rates are supporting growth. The lower exchange rate over the past year has facilitated the shift of resources to the service sectors and moderate wage growth is underpinning strong employment growth. This is expected to continue during the forecast period with the unemployment rate forecast to fall to around 5.5 per cent by the June quarter of 2017.
Household consumption is forecast to grow steadily, supported by employment growth, lower petrol prices and a falling household saving rate. The outlook for dwelling investment remains positive with a solid pipeline of work yet to be done, but the rate of growth in this sector is expected to ease over the forecast period.
Similar to many advanced economies, moderate wage growth is expected to continue to keep inflation contained. Low petrol prices and competition in the retail sector are also expected to weigh on inflation.
The outlook for business investment will continue to be dominated by shrinking mining investment, which is expected to fall by 27½ per cent in 2015‑16 and 25½ per cent in 2016‑17. While this drag on growth is expected to lessen by 2017‑18, uncertainty remains as to when the transition to broader‑based sources of growth, already evident in the labour market, will translate into stronger non‑mining investment.
This update was issued on 3 May 2016 and please note that changes in circumstances after the publication of material or information may impact upon its accuracy (including passage of the supporting legislation through the parliament) and also compliance obligations. It is recommended that expert advice be sought before taking action based upon the information presented here.
Member Engagement —
ADIA provides leadership, strategy, advocacy and support. Our members set our agenda, fund our activities and directly benefit from the results. With respect to the Association's work to ensure that the initiatives within the 2016 Australian Government budget support the dental industry, the team in the ADIA national office receive advice and guidance from members serving on the ADIA-BAC Business Affairs Committee.
Further Information —
To keep up to date with how ADIA is working to ensure that the Australian Government budget supports the dental industry, subscribe to the Twitter feed @AusDental or follow us on Facebook at www.facebook.com/dental.industry. Alternatively, you can contact the Association via email at firstname.lastname@example.org or by telephone on 1300 943 094.
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