Further progress towards the full treatment of banking problems and the return to sustainable fiscal budgets in Europe will be important. With greater certainty in the United States over their fiscal policies and the path of monetary policy, the risks there may now be more on the upside.
On the other hand, if some event – like a geo-political shock – led to a wider retreat from risk taking, this could have a significant dampening impact on the global economy. China’s outlook is important for Australia as, for that matter, it is for other countries. China is now the largest or second largest trade partner to most significant economies.