Economic Insights: In 2016, we expect the Australian cash rate to remain steady in the short term, soft domestic GDP growth, and more Fed rates hikes.

The last economic data and key announcements of 2015 are almost in the bag and, on balance, are pointing to Q4 economic growth internationally and in Australia running a touch stronger than commonly expected as little as a month ago. Better-than-previously-expected growth, including in the US, made the first US Federal Reserve (Fed) rate hike in almost a decade almost a done deal last week. In Australia the upside surprises in much of the economic data over the past month means that the Reserve Bank of Australia (RBA) is unlikely to change its cash rate over the next few months. Also the better-than-expected Australian economic numbers are not sufficiently strong to overwhelm the negative forces impacting the Federal Government’s budget position and outlook outlined in Treasury’s mid-year review released last week. However, it is hard to become excited that the better economic numbers late in 2015 will develop into an improving trend in 2016. Click on the (VIEW LINK) to find out why and to read why Christmas spending needs to be strong to maintain recent growth rates.