Transition in China to a lower growth rate and a remix of the economy, together with price dislocation in energy markets, provided significant influences on markets.
‘‘However, we are not of the central view the United States economy faces a recession in 2016.''Manufacturing trends were weak, but employment, household consumption and the government sector were ‘‘relatively strong'', he said.
In Europe, data continued to provide small positive surprises, despite the headlines on migration and concerns about some of the elections being held this year.
Against that backdrop, the perception was Australian economic growth prospects were fragile, investment sentiment was poor and the financial system was exposed to risks including rising resource, energy, agriculture and housing impairments.
‘‘How can Australia not have a recession, given the weakness in resources? is a question we continue to be asked.''
The irony about GDP (gross domestic product) data was it measured real added value, Mr Stent said. Resource export volumes were actually surging and a decline in imported capital equipment for the resource energy sectors would also support measured GDP.
The mining sector was now a smaller part of the Australian economy. Household consumption and broader services sector activity were by far the most important contributors for GDP.
Australian employment growth had been accelerating, he said. In the December quarter, net employment growth averaged 43,000 a month, after averaging a solid 25,000 a month for the 2015 year. It could be employment growth slowed slightly this year.
Housing credit growth had also been improving. Owner-occupier credit growth averaged 1.1% per month in the December quarter and averaged 0.8% a month in the 2015 year.
‘‘These trends are consistent with broader improvements in Australian business and consumer confidence as Australian households and companies react to lower oil prices.''
Harbour was not making an ‘‘asset allocation'' call on Australia, Mr Stent said. Harbour believed investment markets might be overly negative about economic prospects and drawing long bows regarding profits.
Too many commentators expected a sharp rise in bank loan impairments and the housing sector to weaken significantly as the slowdown in the mining sector affected consumption.
In Australia and New Zealand, strong travel, migration and tourism looked set to continue as durable themes, he said. The upgrade of arrivals data in both countries provided evidence of the direct impacts of lower oils prices.
It was likely production cuts would follow. There was rising incentive among OPEC members to gain a consensus on supply, although near-term progress seemed unlikely. If oil prices sustained current levels, there should be an ongoing positive impact on household consumption, he said.
After such a brutal year start for equity returns, commentators were quick to suggest an equity bear market had started. Oil prices moves had led equity volatility The correlation was likely to fade as the benefit to consumers and companies eased fears of financial contagion, he said.
‘‘An equity bear market is not our central scenario. Interest rates and bond yields are too low. Global growth is more likely to be moderate than contractionary.''
The New Zealand economy also seemed set for continued moderate growth, with upside from migration, oil prices and interest rates, and downside from the slowing global economy and weaker dairy prices.
Harbour was hesitant to pick strong sector winners and was retaining a balance of quality growth companies with strong defensive dividend growth and companies with potentially higher growth rates in the technology and healthcare sectors.
