Forget the political hoo-ha in the US or the tensions and voter backlash issues in Europe, 2017 will be a better year than the headlines suggest.
“It will be a lovely year – much better than you think,” Deloitte Access Economics director, Chris Richardson, has told Outlook 2017 in Canberra.
While 2016 finished with “a lot of fear and a touch of loathing” in a volatile political landscape, Mr Richardson has keenly noted politics was not economics.
The issues holding the headlines or the “Twittersphere” were not necessarily as much of a concern as many liked to think.
He pointed to a year ahead favoured by continuing low interest rates, and returning revenue growth for the Australian economy as Chinese demand continued and the US economy gathered momentum.
Australia posted a record seasonally adjusted trade surplus of $3.5 billion in December and may even turn into a current account surplus – the positive difference between a nation’s savings and investment.
The recent strengthened Australian dollar – up from around US72 cents to US76c in the past four months – reflected the strengthening health of Australia Pty Ltd as average national revenue growth from housing, mining, grain and livestock production recovered towards six per cent from a significant dip to below 2pc in 2015.
After five years in which Australian living standards had flattened or dipped, commodity exports were likely to keep driving revenue gains for the next few years.
This was particularly the case while China was still actively buying our food and mineral commodities and maintaining its pump-priming economic strategies at home ahead of key leadership reshuffling later this year.
“The world is throwing money at us again, and technically speaking, revenue growth is going vooshka,” Mr Richardson said.
However, the dollar would continue to hold stronger while national earnings were robust, and eventually Australian interest rates would break their decades-old downward trend, gradually following US rates up – probably in 2018-19.
Australia’s fortuitous dividends from the Chinese/South East Asian growth model, based around intensive infrastructure spending, were also likely to dwindle.
Access Economics is tipping three or four interest rate rises in the US this year triggering steady rises in Australian standard variable mortgage rates from less than 5pc today to about 6pc within five years.
“Don’t rely on interest rates staying as magnificent as they’ve been,” Mr Richardson said.
“Most people in this room have never known a continuously rising interest rate environment because lending costs have been in retreat since their 1980s peaks.”
“China will have to restructure its spending model down the track because it’s increasingly relying on debt to build stuff like shopping malls, airports and apartments which are not being used much.
“It’s not be a disaster, but the inevitable China transition process will have an impact on us.”