The global backdrop remains positive with the US economy improving gradually, China continuing to grow at a firm pace and quantitative easing in Europe and Japan supporting the prospect of better growth over the next two years.
A lift in exports, ongoing low interest rates, the need to replace capital stock, continued housing and infrastructure construction and a lower AUD are expected to see Australia’s annual growth pick up to 3.2% at the end of 2016.
We expect the RBA to leave its cash rate on hold this year, before beginning to increase interest rates in late 2016.
After sliding in late 2014 and early 2015, the AUD has stabilised within the range of US$0.76-$0.79, and we forecast it to end 2015 at $0.73, and end 2016 at $0.75.
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