Equities won’t drag the economy down

The slump in equity prices since the turn of the year is unlikely to be followed by a similar slump in economic growth in Australia, especially now that equity prices are rebounding. Over the past 20 years the equity market has been a poor predictor of GDP growth. That said, Australia is hardly firing on all cylinders – retail sales were flat in December and employment fell for a second month in a row, albeit after very strong rises in the previous two months. As such, 2016 is already shaping up to be another disappointing year, with GDP growth unlikely to improve on last year’s 2.3%.