January 25, 2024

Comments from the desk of NAB’s Chief Economist – 25 January 2024

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


Last week, we changed our cash rate forecasts on the back of a lower-than-expected inflation outlook. Today we released our latest local and global forecasts (Forward View – January 2024) ahead of the RBA Board meeting next week.

As can be seen in our December Business Survey, growth slowed sharply in late 2023. Business conditions have returned to their long run average after a period of very strong outcomes through late 2022 and H1 2023. Both profitability and trading conditions are now below average, with the overall result propped up with a still healthy read for employment. That said retail and consumer-related sectors are clearly struggling with weak forward orders, weak confidence and below average-conditions. Our internal transactional data suggests the strength in November retail sales were indeed a pull-forward of spending, with an offsetting decline in December.

As we look at the first half of 2024, we see no reason to expect a better half. Indeed, the risks for the consumer are probably on the downside. And more recently there are emerging signs of weaker activity in manufacturing and construction – two very cyclical sectors – via our business survey.

Interestingly, our behavioural surveys also point to growing concerns about job security. That is a very recent development. Thus, in the first half of 2024 we do not expect to see GDP growth of more than ½%. For the second half of 2024, we see Government relief to cost of living pressures (either in the May Budget or earlier) and Stage 3 tax cuts (however formulated) helping to lift momentum while the RBA may begin to gradually ease rates from November. Overall, we expect GDP growth of only 1.7% through the year.

That means the economy will not produce enough jobs to keep the unemployment rate from rising to around 4.5% by end 2024. As we have seen, trend employment growth is currently running around 19k per month. To stabilise unemployment the required rate is nearer 30k.

In many ways, as long as unemployment does not run significantly higher than the gradual deterioration we expect, the consumer can probably struggle through to better times in late 2024 and the prospects of relief from both fiscal policy and rates. That will involve a juggling of their incomes (more hours worked) and their outlays – especially cutting back on non-essential purchases (such as household goods and expenditure on holidays etc).

For further details please see, Comment from the Chief Economist (January 2024)