The global economy performed well again in 2018 after the strength seen in 2017. However, as the year progressed the recovery became less synchronised, with growth in the US strengthening further while falling away in most other countries, as the strong US dollar and rising trade tensions undermined activity in some economies.



After exceeding expectations in the first half, the Australian economy also appeared to slow in the second half of 2018. At around 5%, Australia’s unemployment rate is now at the lowest level since 2012. Looking ahead to 2019, we anticipate continued moderate growth, supported by strong public sector demand, business investment and exports. However, the housing sector is emerging as a significant potential risk, particularly should east coast house prices continue falling in 2019 at the same rate as in the past 18 months. Inflation pressures remain muted, suggesting the Reserve Bank of Australia could go another year without lifting interest rates.



The ideas outlined in this paper represent our observations on the challenges, opportunities and drivers of change present in the current investment environment. We provide these ideas with the aim of provoking discussion, but the appropriate response at an investor level will be heavily influenced by the specific beliefs, objectives and constraints of each investor. We look forward to helping investors adapt their strategies as new risks and opportunities arise over the course of 2019.


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