At the same time, business confidence and sentiment is rising strongly. The Dun & Bradstreet survey of business expectations is pointing to upbeat conditions into the first quarter of 2017. Expected sales, profits and employment are at multi-year highs which, if correct, will underpin the strongest economic conditions since the GFC.
The construction sector is poised for a strong 2017. Not only is dwelling construction running at record highs with a huge pipeline of work still to be done, but infrastructure and non-residential construction is also surging. New transport facilities, hotels, office blocks, schools and university campuses are being built at a rapid pace and it will take some time to build them. The construction sector itself looks like adding close to 1 per cent overall GDP in 2017 and probably into 2018, even if housing investment falls away.
If consumer demand can recover from the post-election doldrums, a scenario where GDP growth stays above 3 per cent is a distinct probability. If that is the case, there is scope for an improvement in the labour market and for the unemployment rate to edge lower. By this time next year, the unemployment rate is likely to be around 5 per cent.
There are still risks, as always. The US Presidential election, Chinese property and debt issues, Brexit and any number of global events could derail this path to stronger growth. But for now, the lift in commodity prices, a more optimistic business sector and generally favourable conditions will see the RBA sit on the side line for many months to come.
There is a growing possibility that the next move in interest rates will be up. It would be prudent for mortgage holders and the business sector to factor in the possibility of higher interest rates and not get too used to interest rates at these record low levels.