Challenges remain ahead for the Australian economy , too , which are likely to keep business confidence and investment on a weak plane over the next two years . Wage growth , except for skilled professions and trades in some sectors and states , is likely to remain relatively weak , affecting retail trade and household expenditures . Politics is highly adversarial , with major political parties unable to forge a workable consensus on many important policy areas surrounding taxation , energy security , and the environment . But , more importantly , investment cycles across Australia are likely to remain highly unsynchronised over the next two years – keeping national economic growth constrained to around 2.5 per cent per annum on average over 2017 / 18 and 2018 / 19 .
These unsynchronised investment cycles include :
• Residential investment , a key driver of growth over the three years to 2015 / 16 , peaked in 2016 / 17 and is expected to decline over the next year three years , with particularly large declines expected in the volatile highdensity apartment market
• Mining investment is now entering its fifth year of an expected six-year decline , with further significant declines to come over the next 18 months as the LNG investment boom finally runs its course . This will see mining construction fall around 78 per cent from the 2013 / 14 peak to the 2018 / 19 trough , although mining equipment purchases and exploration have started to recover across most commodities , indicating the initial stages of the next upturn
• Public investment finally started to recover in 2015 / 16 after five years of decline , surging 10 per cent in 2016 / 17 alone . Growth in public investment is being supported by new transport infrastructure , but will be offset in part after 2017 / 18 by falling investment in Australia ’ s largest public infrastructure project – the National Broadband Network ( NBN ). Total public investment is expected to be flat or falling ( and hence be a drag on Australia ’ s economic growth ) by the end of the decade
• Non-mining business investment is currently showing only modest growth but is expected to strengthen from late decade as higher profitability , demand and capacity utilization ( in turn supported by a slightly weaker Australian dollar ) drive a change in psychology .
Figure 1.3 : Australia – Basic Economic Indicators
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