Australia - Goldman Sachs boosts forecasts for Australian dollar and GDP

Author: Eamonn Sheridan | Category: News

The latest AUD and GDP forecasts from Goldman Sachs economist Tim Toohey in his latest piece:

AUD forecasts:
  • 0.78 in 3 months
  • 0.77 in 6 mths
  • 0.75 in 12 months
GDP forecasts:
  • To average 2.8% in 2017
  • 2.9% per cent for 2018
  • 3.0% in 2019
  • 3.3% for 2020
Toohey cites (bolding is mine):
  • Believes Australia has moved through an important transition point
  • Says prospect of stronger and less volatile real economic growth
  • Mining to be a driver in 2017 ... "A sharp turn in Australia's national income dynamic now looks likely to move significantly higher following the spikes in coal and iron ore prices in the closing months of 2016"
  • Says bulk commodity prices to fall from current levels
  • But the surge recently should translate to an 8% terms of trade gain next year ..."Likely to set off a chain of events through the Australian economy in coming months ... resulting surge in national income should be reflected via much stronger mining profits, a large taxation windfall for the Federal government and elimination of the threat of a sovereign downgrade. Upward influence also comes from the restarting of idle capacity in the coal sector and a better climate for broader business investment, ultimately leading to better employment and wage outcomes"
  • A run of trade surpluses now in prospect for 2017 ... Stronger commodity prices, increasing LNG production, "suggests Australia will post the largest trade surpluses as a share of GDP during 2017 since any time since the early 1970s"
  • Clear upside risk to the A$ from current levels
  • Forecasts of a sharp fall in new dwelling investment in 2017-18
  • Expects RBA to start increasing interest rates in late 2017 or Q1 of 2018

Bullish stuff from Goldman Sachs's Toohey. I'll be watching the trade balance data in coming months for a guide to the likelihood of his views translating into the AUD and GDP.
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