economic and financial outlook
TRANSCRIPT
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March 2017
Brian Redican
Risks and Opportunities in 2017
Economic and Financial
Outlook
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Higher US interest rates would exert upward pressure on global rates
Is the 35-year secular decline in rates over?
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Fewer young people vs more old people
Demographics and saving behaviour
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Slower population growth and demand
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Global bond yields have risen as has inflation…
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When rates are flat, currencies are crucial
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Looser Chinese policy boosted activity…
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…boosting commodity prices and inflation
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Higher oil prices have driven up inflation…
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Global manufacturing growth has improved…
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Firms rebuild inventories and fiscal drag ends
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Tight US labour market but wages still weak
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Markets are prepared for modest inflation
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Two risks for the US economy…
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Global manufacturing has improved…
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Europe is yet to see inflation rise sustainably…
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Political events loom large in Europe in 2017
15 March Netherlands General Election
March UK Article 50 Trigger
23 April French Presidential Election
7 May
2Q17/1Q18 Risk of Italian Election
24 September German Federal Election
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5% chance that the Eurozone disintegrates?
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Australian growth and inflation remain sombre
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Weak wages growth ensures ‘real’ debt
burden will remain high
Little scope for further debt-fuelled
economic growth
Aussie households face high debt & weak wages
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Still lots of work in NSW and VictoriaDetached house activity diverges
Housing construction is still boosting growth
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But are we about to see much stronger growth?
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US economic growth has been slowing
4.2
3.2
2.5
2.0
0
1
2
3
4
5
50's-60's 70's-80's 90's-00's 2010+
US Average Growth% y/y
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Source: PIMCO
Reviving ‘animal spirits’ or destroying global trade?
The Trump Effect