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Speaking at the Melbourne release event for CEDA's EPO report, Mr Pallas told the audience: “We are certainly living in interesting times. We’ve had Brexit and an election of a new US president – while the full impact of these events remains to be seen, they do add to the uncertainty surrounding the global economy and financial markets.”
“In its recent market update, while the IMF left global growth projections unchanged, and even marginally increased US growth expectations, it noted uncertainty of the impact under President Trump’s economic and policies.
“I think it’s fair to say that globally these are unprecedented, even tumultuous political times.”
Mr Pallas went on to say that in Victoria things are more stable, though 2016 was undoubtedly a year of transformation for the state, with great disruption to employees in the manufacturing and energy industries.
“In the past year, Ford closed its factory in Geelong and Broadmeadows, Toyota recently announced a closure date for its Altona plant. This will mark the end of 90 years of car manufacturing in Victoria. Then of course there is the impending closure of the Hazelwood Power Station,” he said.
Mr Pallas acknowledged the upheaval and strife this shift would cause to individuals and their families who work in these industries, but said we must look to where future prosperity lies for the state.
“Clearly we are moving from an industrial economy predominately based on manufacturing, to one now predominately based on services. I’m referring specifically to the retail, tourism, education, technology, healthcare and professional services sectors," he said.
“Manufacturing is giving way to the growing strength of the high skilled services sector.
“While Britain and the US may look inward and to the past, Victoria’s economic resilience is underpinned by our openness, our access to global markets, and a willingness to innovate, adapt and look to the future."
Mr Pallas also emphasised the current strength and stability of the Victorian economy, saying: “The Victorian economy remains strong. Our economic and budgetary position is the envy of the nation, and currently dwarves the resource-rich states.”
As part of the half-day event in Melbourne, Commonwealth Bank Chief Economist and Managing Director, Economics, Michael Blythe also delivered a presentation on the economic climate for Australia more generally.
While Mr Blythe said there were some less than positive trends in the last year, notably the growth slowdown at the end of Q3, Australia should view this as more of a pot-hole than something more sinister, saying that the occasional weak spot is not unusual in long-running expansion.
Speaking on the international changes, he stated “unexpected political outcomes have almost become the norm”.
With US President Trump’s election, he said the USD’s strength would be the theme for 2017.
“Most currencies will weaken against the USD as a result. A stronger USD means the AUD will weaken. We put the AUD at US$0.71 at the end of 2017. But the RBA is on hold, commodity prices are higher and the current account deficit is narrowing,” he said.
“So we also expect the AUD to outperform the EUR, GBP and JPY.”
A panel of experts also spoke at the event, comprised of: Woolworths, Australia Post and AMP Limited Non-Executive Director, Holly Kramer; Navitas and Programmed Non-Executive Director, Lisa Paul AO PSM; UGL Chairman and Sonic Healthcare, Fletcher Building, Adairs and Sigma Pharmaceuticals Non-Executive Director, Kate Spargo.
The panel discussed the economic opportunities available to Australia if government and business worked together.