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Australia’s Q4 National accounts have confirmed that economic growth slowed significantly in H2 2018 with figures showing substantial weakness in the private sector, led by a fall in dwelling investment and only modest growth in consumption, notes the research team at NAB.

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“In addition, business investment saw a lift in the non-mining sector, though this was partially offset by ongoing declines in the mining sector. Supporting growth was strong spending in the public sector. While we have updated our forecasts, integrating the Q4 national accounts, we have not significantly changed our view on economic growth over the next two years.”

“We expect GDP to grow by 2.5% over the year to December 2019 before slowing to 2.2% in December 2020. While the labour market has so far remained resilient to the slowing in growth over H2 2018, it likely lags economic activity, and with an outlook for slower growth, we expect little improvement on unemployment from here, in fact we now forecast for the unemployment rate to drift up slightly over the next two years.”

“With inflation currently low, and financial stability risks having abated, we think a forward looking central bank will cut the cash rate from here, to bolster the economy and see better outcomes in the labour market and potentially see inflation return to the centre of the target band sooner. While the timing of a renewed easing cycle is data dependent – any near term cut would be driven by deterioration in the labour market – we think the bank will move to ease rates in July and again in November.”