In our last market update, for the latter part of last year, we touched on some of the challenges faced by the Australian economy. A mixed real estate market, desultory real wages growth, some concern about high household debt and those international trade tensions which were impacting our exports in the minerals and agricultural area. There was also that increasing regulation which had a cost to Australia. While these challenges remain, economic indicators point to effective moderate year end growth and that is supported by a low level of interest rates, by recent tax cuts, by that ongoing continuing spend in infrastructure and a brighter outlook for the resources sector. There's also signs of the continuation of an improvement in established housing markets, particular Sydney and Melbourne which is so critical to the confidence of the Australian economy. Later in the year, we expect to see a recovery in residential construction. Coupled with those further cuts in October 2019 to the base rate interest of 0.75% and the fact that there have been no further changes since that date, means that the Reserve Bank remains optimistic that the slowdown in global growth which started in 2018 is slightly coming to an end, and this in turn will improve Australia's economic growth. The prediction from around 2¾% this year to around 3% in 2021,this critically is a step up from the growth rates recorded over the last 2 years.
However, the recent bushfires which many of you would have read about and seen on the news and the ongoing drought conditions in Australia will undoubtedly have an impact on the country, particularly in the tourism, the agricultural, the rural, the mineral resource sectors. Of course the Coronavirus outbreak for the rest of the world as well as Australia is having a significant effect on the Chinese economy, which of course is expected to have an impact on the near term growth outlook for Australia as well, given our close trading ties with both China and Asian economies.
So we expect overall growth in Australia's trading partners to be slightly lower in 2020,and while no-one can predict the ongoing effects of the Coronavirus issue on the Australian economy and that remains uncertain, there is definitely going to be some spill over into our economy at least in the short term. There will be modified commodity exports, particularly education and tourism sectors will be effected which will go to our sense of national confidence.Even though mining investment increased in 2019, and the expectation is that over the next couple of years that's going to increase, particularly in the iron ore and the coking coal production as well as continued ramp up of LNG exports, there remains the uncertainty of the Coronavirus issue on the economy.
The Australian dollar dipped to its lowest level in over 10 years during January but is still back now around that 67 cents mark.
So in summary, a bit of a curate's egg - that optimism engendered by the predictions of the Reserve Bank for increased economic growth tampered somewhat by the extraordinary events of things like the Coronavirus. Having said that though, unprecedented continuing levels of inbound foreign investment interest across all sectors of the Australian economy gives us reason to be extremely confident about the year ahead.