Australia gears up for boom

The Australian economy has emerged from the global financial crisis relatively unscathed and is now gearing up for another major cyclical upswing, according BIS Shrapnel’s Long Term Forecast Report.

The report, released today, also said Australians should brace themselves for further home loan rate rises as the economy continues to strengthen by way of increasing employment and greater exports.

“We should see the Reserve Bank hike rates from neutral to contractionary, meaning a cash rate over 6 per cent and the housing variable toward 9 per cent before the next episode is over,” BIS’ senior economist Richard Robinson said.

Mr Robinson said he expects there to be another boom within the decade.

“We are now well and truly into recovery from what turned out to be a modest downturn – and not a recession as other forecasters predicted at this time last year,” he said.

“I know the GFC is still front of mind, but it won’t take long before we forget. Remember the ‘disastrous’ sharemarket crash of October 1987, which was quickly followed by the property boom of 1989, which preceded the recession ‘we had to have’. The build up this time will be slower, but it’s the current caution in risk averse debt and equity markets that is setting us up for the stock and capacity shortages that will underwrite the next boom later this decade.”

Source The Adviser