In its latest long term forecast BIS Shrapnel has predicted the turnaround in the Australian economy will be slow because of an expected slump in business investment.
BIS Shrapnel’s Long Term Forecasts, 2009 – 2024 report said the Australian economy’s most difficult phase will occur over the next year, forecasting a 17 per cent decline in business investment, falling household incomes and weak consumer spending.
According to the report’s author and senior economist, Richard Robinson, the government’s FHOG boost has helped to ease the extent of the downturn, however, it will not been enough to prevent the decline in total investment.
“The credit squeeze has expedited and exacerbated a downturn in business investment,” Mr Robinson said.
“This is expected to increase unemployment during 2009/10, with the unemployment rate to peak between 7.5 and eight per cent during 2010.”
Beyond 2010 BIS Shrapnel is however forecasting a solid housing construction led recovery.
Economic growth is tipped to strengthen over 2011/12 as consumer demand recovers, and subsequently, business investment and employment regain momentum.
According to the report, strong pent-up demand in combination with low interest rates, high rents and high rental yields is set to drive a strong phase of construction from 2010/11, which will strengthen over 2011/12 and 2012/13.