Australian GDP – trend growth stepping down - ANZ
Analysts at ANZ Bank explained that they think Australia’s trend rate of growth for the coming decade will be somewhere between 2.0% and 2.5% per year – this is lower than the estimates from the RBA and Treasury.
This slowdown has been blamed on a drop in productivity growth. It is, at least partly, global in nature. But we think there is also an endogenous element, caused by lower non-mining business investment.
The policy implications of this are mixed. Lower trend growth means that less growth acceleration is required to shift unemployment lower. This may not make monetary policy easier, however, as the factors pushing the trend lower may lessen its effectiveness. Lower trend growth poses challenges for the fiscal outlook.
Critically, however, the slowdown in trend doesn’t have to be meekly accepted. If the primary cause of the slowdown is endogenous then there are potential policy options that can reverse it. To be specific, the policy focus should be on lifting investment.