• Based on incoming information, we have modestly reviewed our GDP forecasts to 2.6% in 2015/16 and 3.0% in 2016/17 (annual average).

• Overall, NAB Economics remain of the view that the recovery in the non-mining sector is slowly becoming more well entrenched. The RBA also appears cautiously optimistic on this front, pointing to above-average business conditions, growth in services sectors and “respectable growth in employment”.

• The change to our 2015/16 forecast largely reflects the incorporation of a more volatile quarterly profile – including a relatively strong bounceback in Q3 following a surprisingly weak Q2 due to temporary factors. This may also lead to some upward revision to the RBA’s forecasts for the year to Jun-16 in tomorrow’s Statement on Monetary Policy.

• It is also possible that the RBA will review its high GDP forecast of 3–4½ y/y for Dec-17, in light of Governor Glenn Stevens’ stated lower assumption for potential growth of around 2.8%.

• The weak Q3 inflation outcome has also reduced our near-term y/y inflation forecasts due to base effects, and we anticipate a similar small downward revision to the RBA’s forecasts tomorrow.

• More detail underpinning NAB Economics’ forecast outlook will be released on Tuesday in the Global & Australian Forecast document.

For further details please refer to the attached document.

Flash Australian Forecast Update – 5 November 2015 (PDF, 220KB)