Outlook for 2017—moderate recovery marred by downside risk

Overall, while growth in Australia’s major trading partners is expected to gradually fall, emerging Asia will continue to outperform (Chart 3). Global recovery hinges on better growth in emerging markets. Specifically, the diminishing drag of commodity-induced recessions in Russia, Brazil and Nigeria needs to offset China’s continued slowdown. In advanced economies, stimulus-inspired rebounds in the US and Japan may provide some concession to the potential negative repercussions still to come from Brexit. Moribund trade growth will likely persist—despite higher commodity prices inflating the price of traded goods, structural factors like on-shoring and recourse to automation, will limit any acceleration.