2018 CCF Victorian Infrastructure Outlook Report 1 | Page 10

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Business surveys are consistently showing
optimism, and the recent capital expenditure survey
suggests a further acceleration in investment spending
over the next 12 months, suggesting an improved outlook
for non-mining investment.
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New Public investment will fill some of the
gap left by the retreat in private dwelling investment
and shutdown of the automotive industry. We expect
further strong growth in new public investment in 2017/18
and 2018/19 to make a significant contribution to the
state’s economic growth. Increased public consumption
and investment spending is being funded by asset sales
(mainly the $9.7 billion Port of Melbourne sale), rising
real estate stamp duties, healthy payroll tax receipts and
commonwealth road funding.
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Employment to moderate from recent strength
– 3.7 per cent in 2016/17 and 3.5 per cent over 12 months
to November 2017 - with annual growth expected to
ease below 3 per cent over the next year and further to
around 1 per cent over 2018/19 and 2019/20. This will see
household consumption expenditure weaken over the
next 3 years.
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Victoria is a net exporter of goods & services
to other states and will be affected by sluggish national
growth for the next 2 years.
Outlook for the Global Economy
During the coming structural readjustment,
the Australian and Victorian economies are being
supported by a relatively positive global economy.
Despite several well known risk factors (conflict in North
Korea, Chinese financial stability, US and global trade
policies), forward indicators currently point to robust and
stable activity in the world economy. Reflecting a boost in
relatively broad-based support from global trade, world
GDP growth is anticipated to increase this calendar year
and next, before moderating slightly. The picture across
countries and regions is mixed, but overall positive for
the Australian and Victorian economies, with relatively
stronger growth expected amongst key trading partners:
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Although growth has slowed since 2010,
emerging Asia still posted growth of 6.0 per cent in
calendar 2016. Declines in oil prices and more hawkish
signals from central banks in advanced economies
may worsen the external backdrop for some emerging
economies, driving growth lower.
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OECD economies grew at 1.8 per cent in
calendar 2016. Oxford Economics forecasts growth
will pick up to around 2.5 per cent by calendar 2018.
Importantly, Australia’s trading partner growth (weighted
by exports share) will grow at a faster rate over the next
five years, due to the high weighting of the relatively
fast-growing economies of China, East Asia and India in
Australia’s export mix.
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In China, GDP growth has moderated in recent
years from pre-GFC rates of around 10 per cent, partly
reflecting the authorities’ efforts to rebalance the
economy towards household consumption. Chinese
economic growth is expected to soften gradually
from 6.7 per cent in calendar 2016 to 5.2 per cent by
2022. China’s real GDP growth is easing as the country
continues its transition to a demand-driven economy
amid further urbanisation, demographic changes and
weaker growth in investment.
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Japan’s GDP grew by a weak 0.9 per cent in
calendar year