Australia continues to occupy a favorable risk-return position in our global RARE framework, with out-performing returns being forecast, and we expect comparatively lower market risk. Sydney and Melbourne have been the outperformers while the “commodity cities,” most notably Perth, have proved to be higher risk and lower returning. The Australian economy is forecasted to have an average annual GDP growth rate of 2.7% for the 2018-2022 period, which is in line with the 10-year historic average. The national unemployment rate is forecasted to decrease from the current rate of 5.4% to just 4.9% by 2022 (Oxford Economics, September 2017). The Reserve Bank of Australia has cut the policy rate to a record low to spur growth, but at some stage in the coming years it must likely follow the U.S. Federal Reserve and hike rates. As of yet, there remains little evidence of inflation breaching the target band. But the country is certainly not without risks; a strong house price cycle in recent years and high household debt levels are among the issues we are most closely watching in the year ahead.
Source : CBRE Global Investors