Australia: Aggregate economic outlook remains somewhat bland - NAB

The aggregate outlook for the Australian economy remains somewhat bland, despite solid activity in non-mining sectors outside of retail, according to analysts at NAB.

Key Quotes

“While there will be some oscillation in the through-the-year growth rate as LNG exports and dwelling construction ramps up (in H2 2017) and then taper off over the course of 2018, the broad thrust remains for annual average growth to remain between 2½% - 2¾% until 2019. Our early estimate of GDP in Q2 is for growth of 0.6% q/q (1.6% y/y), with even stronger rates expected for Q3 and Q4 as LNG exports ramp up further.”

“We have revised up our employment forecasts in the near-term based on strength in partial indicators (such as NAB Survey employment), which will see some downward pressure on the unemployment rate through the remainder of 2017. Employment growth then eases a little through 2018, as economic growth loses momentum. Despite the RBA’s discussion of the neutral cash rate, there is no urgency in starting to return to neutral (the point at which monetary policy is neither expansionary or contractionary). Spare capacity in both the economy and the labour market provides lots of time for the RBA to remain in”watch and see” mode. We continue to expect no change to the cash rate until 2019, with some risk of an earlier hike if current strength in employment is sustained.”