Matt Sherwood, Perpetual's Head of Investment Market Research has released his monthly insights, writing about the likely divergence of earnings growth and...

Matt Sherwood, Perpetual's Head of Investment Market Research has released his monthly insights, writing about the likely divergence of earnings growth and economic growth in the near future for Australian companies. He notes the 30-year long leverage boom and 10-year long mining boom that has occurred in Australia which has lifted our incomes above the US, Japan and Europe after being below global averages in 2000. Sherwood believes that Treasury forecasts for trend growth by FY16 are wildly optimistic with significant downside risk. If growth ends is half this rate, the government will require an additional $A20billion to balance the budget by 2016/17. Lastly, he notes the Great Complacency in Australia, where huge revenue growth has put cost efficiency on the backburner for some time. For Sherwood, this means that cost-out drives should support earnings as the domestic economy further slows with increased divergence between earnings growth and economic growth. (VIEW LINK)