Eurozone to outperform Australia? Even before the European Central Bank (ECB) starts its 1.1 trillion euro quantitative easing program on Monday, it has raised its growth forecasts for the next two years -- and cut its inflation predictions. In fact, there is a chance that if the growth forecasts are accurate (a big ask, mind you) the eurozone economy will do better than Australia in the next year. The ECB sees GDP growing by 1.5% this year, up from 1% in December, and 1.9% in 2016 and 2.1% in 2017, if it completes its easing spending program.
Considering Australian growth will slide from 2.5% in 2014 to something under 2% for much of this year, our growth trajectory is heading in the opposite way to the eurozone’s. Inflation in the zone though remains low -- the new forecast for 2015 is zero inflation (currently minus 0.3%), down from December’s 0.7% increase. Inflation will rise to a positive 1.5% next year and 1.8% in 2017 if the ECB’s easing program is completed, although the forecasts for 2016 and beyond are very rubbery ... in a eurozone sort of way. -- Glenn Dyer