Australia: Growth to continue at a below trend pace - NAB

According to analysts at National Australia Bank are expecting Australia’s growth to continue at a below trend pace over the next few years and see growth of 1.7% this year, before a small improvement to 2.3% on a year-average basis in each of the out years.

Key Quotes

“We continue to see the same factors driving the growth outcomes. The household sector is expected to remain weak with modest consumption growth and ongoing falls in dwelling investment. Offsetting this will be ongoing strength in public spending as well as near-term pickup in exports. Business investment is also expected to make a solid contribution.”

“With overall growth below trend, we see a small deterioration in the labour market with employment growth slowing and the unemployment rate rising gradually - seeing a further build-up of spare capacity. As a result, our outlook for inflation remains meek, with core inflation only reaching the bottom of the RBA’s target band by end-2021. Consequently, we see a further rate cut in 2019 and think that more work from fiscal policy will be required.”

“We would also not discount the risk of further monetary easing in 2020. The recent run of high frequency data suggests that growth is likely to have remained weak in Q2 with soft retail sales growth pointing to continued weak consumption growth, and continued below average business conditions in the NAB business survey pointing to weakness elsewhere in the economy.”