ALTAIR’S CHIEF ECONOMIST STEPHEN ROBERTS FEATURES IN SMH

Australia’s economy is far from a recession and its outlook has improved, poised to attract international buyers, according to two major investment firms.

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Stephen Roberts, chief economist at Sydney-based Altair Asset Management, said the local economy was faring better compared with most of the world, with global growth set to remain stagnant at 2.8 per cent in 2016.

"There is more reason for international investors to carefully trawl Australian opportunities and not to sell, but to buy, especially after the underperformance of the Australian sharemarket over recent months," he wrote in a client note.

Mr Roberts listed four signs, albeit tentative, that investors should be encouraged by: the depreciating currency, the housing boom correcting rather than collapsing, the changing mix of the big banks' loan books and strong employment numbers.

"The combination of these four positive factors means that the risk of Australia slipping in to recession has lessened over the past month or so from a near 50 per cent chance to under 30 per cent in our view," he said.

1. Currency

The depreciating Aussie, which has fallen 25 per cent against the US dollar in two years and 16 per cent on a trade weighted basis was doing its job in lowering export prices while boosting tourism.

2. Housing

Housing, meanwhile, had turned from a predominantly speculative investment market to a more stable owner-occupier market, meaning macro-prudential policy was working, Mr Roberts said.

"That does not mean that house prices will not fall, but it does imply that the fall is likely to be much less than if investors driven entirely by unrealistic expectations of capital gain had continued to be far the most dominant influence in the market," he said.

3. Banks' loan mix

The big four banks had managed to raise the capital required by the Australian Prudential Regulatory Authority without too much market disruption, and their loan books were shifting to more diversified mix of risk in both home and commercial lending.

4. Jobs growth

Finally, employment growth, which posted very strong numbers in October and sent unemployment back to 5.9 per cent should prop up retail spending and housing demand.

Underpinning the unknowns was the fact that the Reserve Bank of Australia had room to ease if necessary, Mr Roberts said.