The attached note looks at the outlook for the Australian economy in the face of the housing downturn and fears this will cause a sharp downturn in growth, and what it means for investors.

The key points are as follows:

  • Australian growth has slowed again. The housing cycle downturn and its impact on the economy will likely see growth constrained to around 2.5-3%.
  • As a result, spare capacity is likely to remain significant, keeping wages growth and inflation low.
  • The RBA is likely to cut rates in 2019 and the housing downturn will likely see Australian shares continue to underperform global shares.

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