eco n o m y
global unrest and
domestic housing
activity
Harley Dale
Chief Economist, HIA &
Australian Construction Insights
T
he 2016 year commenced with a
marked deterioration in economic
sentiment. The primary catalysts were
the (not mutually exclusive) concerns over
the outlook for the Chinese economy and
a sharp decline in oil prices, together with
heightened geo-political risks and tensions.
A litany of gyrations on and concerns
regarding the international economy
resulted from this poor start to 2016. Global
equity markets weakened considerably.
Global bond markets rallied. In mid-January
the International Monetary Fund (IMF)
lowered its world economic growth forecast
– as I portended at the beginning of January
– largely due to perceived downside risks to
the Chinese economy.
There is now an elevated focus on the
amount of debt that has flowed into
developing economies in recent years in
search of higher returns. There is a greater
concern that the debt burden has become
too high. This in turn has increased the risk
of another euro banking crisis given that
much of the debt has come from the still
fragile European banking system.
Within this international environment,
expectations of below-average economic
growth for Australia in 2016 became further
entrenched, thereby increasing conjecture
about further cuts to the Official Cash Rate
(OCR) in Australia from its current level
(held since May 2015) of 2.00 per cent. We
learnt from the first RBA Board meeting for
2016 in early February that the Bank is in
wait and see mode. Should any deterioration
in global economic and financial conditions
derail an improving Australian labour market
and dent economic growth prospects here
at home, then we will have an OCR of 1.50
per cent by the end of the year. At this stage,
that outcome appears unlikely.
22 Australian Window Association Autumn 2016
Against this economic backdrop, the outlook
for new home building in 2016, especially the
first half of the year, remains healthy. This is
primarily due to the large pipeline of work
yet to be started for medium/high density
dwellings. The short term outlook is also for
construction of detached and semi-detached
dwellings to hold up at above average levels.
There are larger than usual geographical
differences in new housing conditions
when we delve below the national surface,
as has been the case all cycle. While new
dwelling commencements are likely to fall
almost everywhere in 2016, we will still be
able to characterise this year as a strong
o