"UK and European investors in particular expect Australia to lower rates much further," she said. "After all, they've been there - to zero or the lower bound - they've seen that movie, and they doubt Australia is really any different." Loading Just like all the rest. That's something Australia isn't used to hearing, particularly after it managed to avoid being swept up in the Asian financial crisis, the early 2000s tech wreck and the 2009 global recession. "The next world shock, we don't escape," said Bob Gregory, a professor at Australian National University in Canberra who has studied the economy for half a century. "But even without that, I'd say there's a 90 per cent chance the economy and employment growth slow from here because our boost from China and immigration is waning."

The Australian dollar reflects similar doubts among investors about the economy's prospects. It has slumped 25 per cent in the past five years, and while that should aid exporters and import-competing industries, there's a sense of stasis among many firms that haven't had to fight for survival for a long time. The Persuader Lowe, who has kept the cash rate at 1.5 per cent since taking the helm in September 2016, used the record pause to try to deflate asset prices and stem a surge in household debt in order to increase the resilience of the financial system. They are key components in his view on what constitutes a healthy economy. RBA Governor Philip Lowe. Credit:Dominic Lorrimer He's also harnessed the bully pulpit to press other actors to take some of the load off monetary policy: urging firms to invest to take advantage of Australia's opportunities; governments to embrace a reform agenda to help prolong the current expansion; and workers to set aside fears over job security to demand higher wages to ensure a well-functioning economy.

But outside persuading governments of the wisdom of investing in infrastructure - particularly when finance is so cheap - to boost economic capacity and hiring, there has been little success. That doesn't mean the RBA chief hasn't won admirers along the way. Loading "Those speeches have been very interesting, sort of 'get your act together you guys,' which is remarkable for a bank governor because 20 or 30 years ago that would've caused a stir," said Gregory, who served on the RBA's board for 10 years. "It's interesting why there hasn't been a backlash, partly I think because you're not getting realistic discussion out of the other economic agencies." The Believer Yet if there's one economist who still believes in the Australian growth story, it seems to be the world's most important central banker. Fed Chairman Jerome Powell has consistently rebutted questions about the inevitability of the record US expansion coming to an end by pointing Down Under.

Most recently, during a Q&A session at the Economic Club of New York in late November, he opined: "Business cycles don't last forever, I guess unless you're Australia, where they're in year 27 of their expansion, which sounds like forever." A declining Australian property market has taken the wind out of the economy's sails. Credit:Paul Rovere It's not all doom and gloom. The shock re-election of Australia's government provides potential for productivity-enhancing reforms as Prime Minister Scott Morrison's victory gives him immense authority within his party. It also draws a line under the past decade's leadership instability that made it tough to carry off complex policy. In the short term, sentiment should improve from the removal of risks related to the opposition's plan to scrap property investment incentives as well as a boost from the government's pending tax cuts. Putting a floor under the housing market - where prices are down almost 15 per cent from their peak in Sydney - and more cash into households' pockets will help stabilise demand. Growth decelerated sharply in the second half of 2018 to just a quarter of the pace recorded in the first half. In the first three months of this year, the economy is forecast to have expanded an annual 1.8 per cent, almost a percentage point below its estimated speed limit.

For the central bank, this isn't strong enough to drive unemployment lower and lift inflation. Money markets and economists are all but unanimous Lowe will need to cut twice, starting Tuesday, bringing the policy rate to 1 per cent. A growing group are forecasting three or even four reductions. Loading The escalating trade war further clouds the outlook: Australia is the most China-dependent economy in the developed world. Meanwhile, there are rising expectations the Fed will give back some of its rate hikes as the US economy slows in response to rising tariffs. Sally Auld, a senior strategist for interest rates at JPMorgan Chase & Co. in Sydney, predicts Lowe will have to cut the benchmark to 0.5 per cent by mid-2020. "One way of thinking about the outlook for Australian monetary policy over the next year is as the beginning of the end of a decade-long convergence trade," she said, referring to Australian and developed-market rate spreads. The cash rate will be "close to the effective lower bound and remain there for some time. For medium-term investors, this is the punchline."

Bloomberg