May 23, 2024

Comments from the desk of NAB’s Chief Economist – 23 May 2024

NAB’s Chief Economist, Alan Oster provides his thoughts on the Australian and Global economy.

Our podcast series continues with NAB Chief Economist Alan Oster providing a 10 minute summary of our key forecasts this month. To listen, just click the link below.

If listening on a mobile device, click listen in browser.


Over the last month we have had lots of new data and policy announcements. Included in that has been the recent Federal Budget, the RBA forecast updates and policy announcements, our own Business survey, and interesting data developments both on inflation and the labour market. And over the next few weeks we will get Q1 GDP.

First, on the big picture, our measures of capacity utilisation (as reported by the Reserve Bank in their SOMP) suggest that, in level terms, demand is still exceeding supply. Hence the labour market remains tight with employers still finding it difficult to get suitably skilled labour. That said, the growth momentum in the domestic economy continues to slow. While overall business conditions were around long run averages (+7 points) the May read suggested a big slowing in the employment indicator (the weakest read since early 2022).  Also, there are now as many sectors showing below long run average reads, as above average reads (the latter mainly services related). Notably the sectors reporting below average reads included retail, wholesale, construction and manufacturing. Business confidence remains well below average and there was a sharp fall in forward orders (my favourite measure in the Survey) – again in the interest sensitive sectors.  Interestingly, in the April survey, there were also signs that wage/price pressures may be moderating.

On inflation, the Q1 trimmed mean CPI at 1.0% was a touch higher than expected but not that much (NAB had expected 0.9%). Wages data on the other hand in Q1 at 0.8% (for y/y growth of 4.1%) was a touch lower than expected.  On balance we have revised our trimmed mean end year 2024 forecast up to 3.4% (was 3.2%) and the longer-term number (to end 2025) to 2.8% (was 2.6%) but still have 2.5% by early 2026. These numbers are very similar to the new RBA projections. While Budget measures (especially energy subsidies) will lower the headline numbers to around 3% by end 2024 their expiry will probably see slightly higher headline numbers by end 2025 (NAB expects a headline rate of 3.0% by end 2025). More to the point, the RBA should (and will) ignore subsidy effects from energy prices and concentrate on the trimmed mean.

For further details please see, Comments from the Chief Economist (May 2024)