2018 CCF Victorian Infrastructure Outlook Report 1 | Page 18

Unfortunately, the strong economic performance seen
over the last three years is not expected to be sustained.
SFD is expected to moderate from recent strength
over the next 3 years as the housing market cools
and consumer spending is held back by weak growth
in disposable household incomes. In the most recent
September quarter, growth moderated to 0.4 per cent
quarter by quarter in seasonally adjusted terms, from
around 1.6 per cent quarter by quarter over the March and
June quarters. SFD is forecast to increase by 3.5 per cent
in 2017/18 before decelerating sharply to 2 per cent in
2018/19. Overall, SFD is projected to average 3.2 per cent
per annum over the next five years, which is still above the
national average of 2.9 per cent; while GSP is predicted to
average 2.6 per cent, slightly lower than the 2.7 per cent
average for national GDP growth.
Key risks to the Victorian
economic outlook
There are external and domestic risks to the Victorian
economic outlook, both on the upside and downside.
On the external front, the main risks revolve around
policy decisions enacted by major economies, and
the performance of these economies affecting trade,
commodity prices and US interest rate settings. On the
domestic side, the main risks include sluggish wages
continuing to limit consumer spending, electricity
prices harming manufacturing output (and household
spending) and upside risks around levels of residential
construction.
•
A key external risk relates to any extreme
policies enacted by US President Trump. In such a
scenario the recent solid momentum in the US economy
is disrupted as the President pushes through highly
protectionist and isolationist measures, fails to implement
a fiscal stimulus package amid deteriorating relations
with Congress, and proceeds with immigration curbs
and deportations that result in substantial labour force
declines. Against a backdrop of heightened uncertainty
and falling confidence in the administration, fragilities in
the US economy are exposed and the global economy is
badly shaken.
the dollar, and this will have a dampening effect on key
service exports, such as education and tourism. The
impositions of tariffs on Mexico, China, Korea and Taiwan
weakens global trade flows substantial, with Asian supply
chains most affected. Global growth slows to 2.5 per cent
(from 3.2 per cent in the baseline) in 2018 and 1.5 per cent
(from 2.9 per cent) in 2019. The countries that take large
hits to GDP, such as China and South Korea, are some of
Australia’s major trading partners. Their weakness would
flow through to the Victorian economy via subdued
demand for exports. For the domestic economy, annual
growth averages 1.8 per cent in 2018/19, which is 0.6 per
cent pts lower than the base case.
•
Delayed Policy tightening amid subdued
inflationary pressures remains is upside for the
global economy, which is reflected in the latest Oxford
Economics Global Risk Survey - nearly 30 per cent of
respondents saw it as the top upside for the global
economy. In this scenario, the current trend