The National Australia Bank’s head economist Alan Oster has stated that while economic growth for Australia looks promising over the next year, consumers will unlikely see any benefits.
At the Australia-United Kingdom Chamber of Commerce in London Mr Oster said that no one should be concerned about the Royal Commission into Australia’s banks. Mr Oster went on to say that the entire commission is a political stunt that will have no real effect other than some “bad headlines”.
Mr Oster said that he does not see the bad press as likely to generate any real economic issues for Australia’s banks.
Mr Oster added that while economic growth in Australia is generally positive going into 2018 the average consumer is unlikely to feel the benefits. This is said to be because of rising energy costs and a stagnation of wage growth in Australia.
Mr Oster reminded his listeners that the Reserve Bank of Australia expects a growth rate of 3%, while his own forecast is slightly lower at 2.8%.
While Mr Oster noted that GDP percentages are going to look promising in 2018 he expects that most people will not feel an increased confidence as a result.
Australia has one of the world’s highest debt-to-income ratios and surge in house prices. Mr Oster stated that he is not concerned about a bubble in the housing market as it was fuelled by demand, interest rates and unemployment rates.
Mr Oster said he did notice there would be trouble for housing in former mining boom areas of Queensland, the Northern Territory and Western Australia. This was because NAB was generally reluctant to lend money to property buyers in those areas.
Mr Oster made speculations about the source of a boom in apartment sales in Australia’s metropolitan areas, stating that the investment was coming from overseas.
My Oster said that NAB estimated that nearly 80% of the purchases of CBD apartments were being done by Chinese buyers. He claimed that the reasoning for this was from monitoring which purchases were funded by Australia’s big four banks and those that weren’t.
A hypothetical scenario posed by Mr Oster detailed the impact that US President Donald Trump’s potential trade war with China could have. This would lead to a hike in trade tariffs with China.
Mr Oster pointed out that any US-led trade war with China would put Australia in an awkward spot between its major defence and trade partners.