While business investment has been a drag on the country’s economy, HSBC explained that a pick-up in growth in housing construction, resources and services exports and household consumption has had a positive effect on GDP growth.
“The rebalancing of activity in the economy has meant that GDP growth was 3.3 per cent year-on-year in Q2 2016, which is an above-trend pace of growth for Australia,” the bank said.
This rebalancing is “now well-progressed”, HSBC said, and drag from mining investment “should gradually lessen from here”.
HSBC added that national income growth looks ready for a pick-up, as commodity prices appear to have passed their lowest point.
“A key result of the rebalancing of growth from mining to the housing and services sectors has been slower growth in wages, which has also weighed on domestic inflation.
“Higher paid mining jobs have been replaced by lower paid services jobs; as the rebalancing act comes to an end, we expect wages growth and domestic inflation to stabilise,” it said.
The bank has also increased its GDP growth forecast from 2.8 per cent to 2.9 per cent for both 2016 and 2017, adding a forecast of 3.2 per cent for 2018.
“Improving local business conditions, business credit and jobs growth, combined with low interest rates and a lower Australian dollar are all supportive of a pick-up in non-mining business investment, which could come through faster than expected now that it is showing signs of getting going,” HSBC said.
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