The World on two pages – June 2015

NAB forecast on the Global economy is for more of the same this year with global growth staying around 3¼% in 2015, followed by a modest upturn in 2016 (largely driven by the US). And in Australia, we see the RBA keeping interest rates on hold, with the next move to up – but not till late 2016.

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Global: Weak GDP results in the US, UK and Canada have outweighed a pick-up in Japan and the Euro-zone and similarly mixed trends among the big emerging economies saw China slowing, India picking up and Brazil still very weak. The monthly manufacturing output and world trade numbers were soft, particularly the latter, and the business surveys do not show any clear evidence yet of an imminent lift in growth momentum. Our forecast is for more of the same this year with global growth staying around 3¼% in 2015, followed by a modest upturn in 2016 (largely driven by the US).

Australia: We have fine-tuned but not fundamentally changed our forecasts– 2014/15 2.4% (was 2.3%), 2015/16 2.6% (was 2.9%) and 3.0% (unchanged) in 2016/17. The domestic economy is struggling to offset the impact of sharply lower mining investment – as again highlighted in the Q1 National accounts. Subsequently some recent data- such as the NAB Survey – has improved, but capex expectations in the non-mining sector have weakened, businesses are reluctant to employ and consumers remain cautious. With future domestic demand still weak, unemployment is expected to rise a touch to around 6.4% by end 2015 and remain relatively for some time. Given our forecasts, we see the RBA keeping interest rates on hold, with the next move to up – but not till late 2016.

For more details, please refer to the attached document.