'The global economy is turning for the better.'
So said Treasurer Joe Hockey in his Budget speech last night. Despite a range of recent economic headwinds that have influenced budget projections, such as lower global demand, falling commodity prices and lower terms of trade, the 2015-16 Budget strikes an optimistic tone on the global economy and future global opportunities.
This picture is driven by strengthening growth in the US, the eurozone and Japan, and is consistent with the sentiment from the April IMF World Economic Outlook that growth among Australia's major advanced-economy trading partners is looking up. For our emerging-market trading partners, a smooth and gentle path is projected for China's moderating growth, ASEAN countries are becoming ever more important, while India is expected to continue to be the world's fastest growing major economy and a source of great opportunity for Australia.
The Budget also flags that the overall risk outlook is more balanced than in the past, with 'downside' risks abating, although a range of risks remain prominent. In the case of the US, the management of monetary policy settings may trigger financial-market volatility. China's transition to a more sustainable growth model may not be smooth, affecting Australian exports. Greece clouds the picture for stronger euro-area growth, while the Japanese outlook remains dependent on overcoming structural challenges and the ongoing success of Abenomics.
The overall impression is of a middle-of-the-road assessment of the international economic environment over the short term for countries with important direct links to the Australian economy. It makes for an interesting contrast with the much more guarded language in other recent global economic forecasts, which have worried about the level of global growth, the weaker outlook facing emerging economies (including G20 members Brazil and Russia); and have questioned how optimistic the world really can be about medium-term global growth prospects.