As at May, 2011, there are a number of good indicators pointing to continued stability of the Australian economy throughout the course of 2011. In general, it remains to be tracking soundly and continues to perform well against some other very soft economies in the western world with the RBA’s projections pointing to a period of steady renewed growth, provided there are no unforseen changes internationally, particularly with regard to China.
The continued and somewhat unexpected strength of the Australian economy over the last 18 months has essentially come about through a combination of factors, being:
- Continued resilience from the unemployment market - Now at 5% after a number of drops in the unemployment rate against earlier projections potentially reaching 8% during the GFC.
- Inflation just outside the RBA’s target band of 2% to 3% - With the inflation rate at 3.3% in March 2011 after a sharp increase following un-avoidable increases in food prices as a result of various natural disasters and high petrol prices due to continued unrest in the Middle East. Moving forward, inflation should return to customary levels as food prices, particularly fruit and veg, return to normal levels.
- Interest rates remain on hold - Still at historically low levels at 4.75% with the RBA predicting rates to remain stable as long as our unemployment rate remains robust.
- Victorian retail sales remain reasonably resilient against the other states – Particularly strong at a year-on-year growth level given the wider economic circumstances over the last 18 months. Continued strength of retail trade will continue to keep retail rental growth present in strip centres and keep vacancies and incentives down.
- Softening in retail sales and apparent cooling off of residential property market - Coupled with risk around parts of the European economy mean the likelihood of interest rates rising is less immediate. Over recent months, the impact of various natural disasters within Australia and abroad have reduced the likelihood of any interest rate increases in the short term.
Despite the positive economic indicators within Australia there still remains a cautious approach particularly in the secondary markets. This is largely due to the limitation of funding within some sectors together with some international uncertainty, particularly around parts of the European economy; however we feel that the outlook for Australia and particularly with prime property, remains positive with good buying opportunities.