Global & Australian Forecasts

NAB’s Global and Australian Forecast provides a monthly snapshot of NAB’s global and domestic economic outlook.

Global economy still slowing with softening across advanced and emerging economies. Growth set to pick-up in 2013 as worst economic risks averted. Australian economy still drifting through soft patch with falling commodity prices now weighing on mining. But investment and exports outlook still solid. Overall outlook remains robust enough to avoid need for further rate cut.

• The global economy is experiencing a broad-based slowdown with both the advanced and emerging economies reporting a softening in growth. Conditions vary between regions with recession in Western Europe, slowdowns in China, India and Brazil and only modest growth in the US. We have marginally lowered our Chinese outlook to 7½% as near-term weakness continues – albeit with more stimulus signalled. Market hopes for US monetary easing and the announcement of ECB sovereign bond buying have seen risk appetites recover. Monetary policy easing in the US plus big emerging market economies as well as the passing of the Euro-zone recession imply a pick-up in global growth from 3% this year to 3.4% in 2013.
• Australian GDP growth eased to 0.6% in Q2 following 1.4% (revised up) in Q1. Moderate consumption and business investment growth were supported by solid public demand and export growth. Outlook broadly unchanged: GDP forecasts 3.4% in 2012 (was 3.6%) and 2.8% (was 2.9%) in 2013 (NAB survey implies 3% for Q3). Strengthening minerals exports should begin to support growth in 2014: we expect 3.4% in 2013/14 and 3.6% in 2014. Business confidence remains soft overall and now weakest in mining after falls in commodity prices. Mining investment pipeline under scrutiny but Australia remains low cost producer with many large projects – especially LNG – already under way.
• Growth likely to soften in H2 2012 as impact of government compensation payments on consumption winds down and public service cutbacks take effect. Also conditions remain very weak in construction and manufacturing. Survey continues to show inflation very subdued: we expect core inflation to be 2.7% in 2012 and 2.9% in 2013. Rising frictional unemployment is still possible but our forecasts imply only a modest weakening in the labour market and hence we expect the RBA to stay on hold until mid-2013. Thereafter, we see rates lifting a touch as mining exports (more than offsetting slower investment) and the labour market strengthen while inflation rises.

For further analysis download the full report.

• Global & Australian Forecasts – September 2012 (PDF)