Australia: Slowing growth with rate cuts ahead – NAB

NAB analysts suggest that following the latest release of Australia’s national accounts data, they are now expecting through the year growth to December 2019 of 2.5%.

Key Quotes

“We have also not changed our forecasts for 2020 at around 2 ¼. What has however happened – given the new history – is a much larger slowing in year average terms in 2019 – previously 2.4% now 2.1%. However we see the through the year growth numbers as providing a better gauge of growth momentum going forward.”

“We now expect not much improvement in the growth rate in consumer spending in 2019 – at around 2.0% and any improvement in 2020 will need policy action.”

“While the exact timing of cuts is data dependent, we see the RBA cutting rates in July and then November. We believe this would be the path of “least regret” for the bank.”

“We expect that as slower growth and less progress on reducing unemployment take hold at a time of subdued inflation and abating financial stability concerns the Bank will assess it can do more to bolster the economy.   Of course a material deterioration in the labour market in the next few months (not our forecast) could see an earlier cut from the RBA.”