By Wayne Cole

By Wayne Cole

SYDNEY (Reuters) - Australia is forecast to enjoy at least another two years of solid economic growth, extending a quarter of a century without recession and dodging the deflation that dogs so many of its rich world peers.

The latest Reuters poll found analysts expect Australia's A$1.6 trillion ($1.2 trillion) of gross domestic product (GDP) to expand by 2.9 percent this year, unchanged from the July poll.

Growth was seen at 2.8 percent next year and 2.9 percent in 2018, a result that would see Australia capture the Netherlands' crown for the longest run without a recession.


Surging export volumes, record low interest rates and an historic boom in home building have already underpinned growth of 3.3 percent in the year to June.

A recent revival in the value of commodity exports also promises to boost company profits, national income and tax receipts in coming months. Surging prices for coal alone could eradicate the country's trade deficit and add 2 percentage points to nominal GDP.

The worst also seems to be over for a long slump in mining investment, which subtracted a huge 1.6 percentage points from GDP growth in the year to June.

Policymakers at the Reserve Bank of Australia (RBA) believe three quarters of the mining downturn has now passed and its drag on growth will greatly diminish for here on.

"The Australian economy's output performance, in aggregate, has been resilient in what remains a challenging environment," said Westpac senior economist Andrew Hanlan. He is tipping economic growth of 3 percent for both 2016 and 2017.

"That said, downside risks persist. World growth is sluggish, and global financial sector vulnerabilities remain."

At home, jobs growth has turned sluggish and heavily weighted to part time work, restraining wage growth and adding to downward pressure on inflation.

Indeed, underlying inflation slowed to a record low of 1.5 percent in the year to June and looks likely to have remained very subdued in the third quarter.

Analysts forecast consumer price inflation would run at just 1.2 percent for 2016 as whole, well under the RBA's target of 2 to 3 percent.

Yet they also expected it to pick up to 2.1 percent next year and 2.4 percent for 2018, a welcome outcome that would eliminate the need for more rate cuts.

(Reporting by Wayne Cole,; Polling by Shaloo Shrivastava and Khushboo Mittal in Bengaluru; Editing by Eric Meijer)

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