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Analysts at NAB suggest that they continue to worry about the Australian consumer as both of their Business survey and internal NAB data point to continued consumer weakness in the early part of 2019.

Key Quotes

“Also construction looks likely to be hit. Overall our key forecasts remain unchanged with GDP growth of 2.4% in 2019 and 2.2% in 2020 – with a more marked slowdown in the through the year numbers (2.7% and 2.2% respectively).”

“A key change to our forecasts this month relates to our interest rate forecasts. We no longer see the next move in rates as up – with an unchanged forecast over the next few years. That said, we are now seriously contemplating the possibility of a cut.”

“In short our forecasts raise the question as to why the RBA would not move to give the economy a pre-emptive boost. Certainly any sign of deteriorating labour market conditions would be enough to see the RBA act more quickly than is currently expected.”

“Not surprisingly we haven’t changed our forecasts for the labour market which still sees unemployment dropping a touch below 5% in the near term but making little improvement thereafter (at around 4.9%). With our estimate of the NAIRU well below 5%, we also continue to only modest growth in wages to between 2.5 to 2.7% by end 2019 and core inflation not back above 2% until end-2019 before moving moderately higher into 2020.”