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Australia: Economy likely to grow 1.6% this year – NAB

Analysts at National Australia Bank suggest that they have fine-tuned their forecasts for Australia’s growth in Q2 (now see 0.4 to 0.5% q/q) and see growth of 1.6% this year, before a small improvement to around 2 ¼% on a year-average basis in each of the out years.

Key Quotes

“The unemployment rate is expected to lift slightly (reaching 5.5%), with employment growth slowing on the back of sub-trend growth. The key dynamic behind this slower growth is a weaker household sector with modest consumption growth (weak wage growth being a key headwind) and ongoing falls in dwelling investment. The public sector and net exports are likely to show some strength, offsetting some of this weakness.”

“We also anticipate a solid performance from the business sector, with private investment likely to rise in aggregate on the back of growth in the non-mining sector, while mining should at least stabilise. However, a weak starting point, with low inflation and sizable spare capacity in the labour market are likely to see the RBA cut the cash rate further (indeed, their own forecasts embody a further 50bps of cuts).”

“We see a November cut as probable but think there is significant risk of further cuts, and would not rule out unconventional policy should the economy not receive substantial support from other policy arms or global headwinds worsen.”

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