Asia to lead global expansion: Deloitte

Colin Brinsden, AAP Economics Correspondent
(Australian Associated Press)

Asia looks set to again lead the way in an expanding global economy in 2018, which will be good news for Australian exporters, a new report from Deloitte says.

This will be driven by improving domestic conditions in Asia, a strong pipeline of infrastructure initiatives and the recovery in global demand benefiting manufacturers.

Deloitte Access Economics lead partner Stephen Smith says people shouldn’t become “mesmerised” by US President Donald Trump’s tariffs on steel and aluminium.

“If that’s as far as it goes, then they don’t change the bigger picture here, which is one of excellent global growth,” Mr Smith said, releasing the fourth edition of Deloitte’s Voice of Asia series on Tuesday.

Such growth is “music to the ears” of Asia’s trade-driven economies.

President Trump has already promised Australia will be exempt from the steel/aluminium tariff.

Mr Smith said global financial conditions remain accommodative and capital flows in emerging and developing economies have returned.

“The global economy seems set for a new investment cycle, which will bolster the rebound,” Mr Smith said.

However, he concedes a descent into a global trade war, sparked by President Trump’s tariff threats, is still a small risk.

He also warns of the build-up of debt since the 2008-2009 global financial crisis, which has been channelled into housing in Australia and other economies, raising concerns of asset price bubbles.

There is also a risk the financial imbalances building in China for some time could worsen.

“This would be significant for Australia as we remain particularly exposed to downside risks from China,” he said.

“Importantly, however, our baseline scenario is for China to continue its impressive performance.”

Deloitte China economist Sitao Xu said China’s ‘belt and road’ initiative, which aims to boost productivity and efficiency gains in Asia by improving links between Asia and Europe is the largest infrastructure effort in the region.

“Even though it’s in its early stages, a number of infrastructure deals have already been signed under the initiative,” he said.

“(It) will create jobs and business opportunities across the region in the short-term, as well as improve the movement of goods across economies and support business productivity in the long-term.”

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