Shane Oliver: The Australian economy still soft

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More help from the RBA and the $A will be needed. “The Australian economy remains in a difficult period as the mining boom unwinds. Non-mining activity has bounced back but is far from strong enough to offset the headwinds coming from the mining downturn. This note looks at the outlook for growth, interest rates, profits and what it means for investors.” June quarter growth was anaemic at just 0.2% quarter on quarter or 2% year on year as can be seen below in the chart. What does this mean for investors? “First, bank term deposits rates are likely remain low or fall even further. The search for decent income flows has further to run. Second, the $A is likely to continue to fall. So continue to favour unhedged over hedged global shares. Third, Australian economic growth is likely to disappoint relative to expectations for the US and Europe, suggesting a case to maintain a greater exposure to traditional global shares even though we expect Australian shares to end the year much higher than they are now.” Full article (VIEW LINK)

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