Australia's GDP growth tipped to pick up amid rising global demand

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Sydney Harbour
The Sydney Harbour Bridge casts a shadow next to the Sydney Opera House and central business district (CBD) as boats make their way along the harbour in this picture taken July 21, 2013. Reuters/David Gray

The Australian economy is tipped to be cruising at a comfortable click in 2018 thanks to jobs boom, public spending and business investment. Growth would level out at 2.8 percent for the next two years, according to forecasts by some analysts.

Such would extend the country’s remarkable run of 26 years without a technical recession. Enough sectors are expected to keep things rolling with the synchronized upturn in the world economy even though Australia’s economy may not be firing on all cylinders.

Paul Bloxham, chief economist Australia at HSBC, told Reuters that Australia is set to ride the global growth wave. They reportedly expect GDP growth to pick up to 3.2 percent this year from 2.4 percent last year as increasing global demand supports demand for exports of high-quality food products, energy commodities, tourism and education.

If the economy exceeds expectations, the year would have a chance to witness the first interest rate hike since November 2010. Treasurer Scott Morrison said the government's economic management will lead to better days.

There are promising signs in Australia’s jobs boom. The strongest jobs growth since 2015 was recorded in 2017, and the unemployment rate fell to its lowest level in four and a half years. Most of the jobs created last year were full-time roles, giving the government a reason to be upbeat about the prospects this year.

But the first half of the year might mean fewer jobs. Some economists forecast an easing of jobs growth in the first half of 2018, with a sharper slowdown in the second half. On Thursday, a 5.5 percent increase in the unemployment rate was recorded.

Not all sectors would be hurt, though. Among those that will remain solid are jobs in public sector construction; healthcare and mining are expected to see improvements.

The Reserve Bank will decide whether or not to hike interest rates based on how the economy performs and what happens with inflation. According to RBA governor Philip Lowe, "it is more likely that the next move in interest rates will be up, rather than down" if the economy continued to improve.

Capital Economics’ Paul Dales believes a rate rise is not on the cards at this stage. Their view is that the overall economy will do okay this year, growing by about 2.5 percent, and that inflation will remain below the RBA's two to three percent target range, reports.