The Bigger Picture – A Global and Australian Economic Perspective – August 2018

Global

Global growth appears to have remained above average through the first half of 2018, but with our leading indicator pointing to a moderation in coming quarters, we think that this will represent the peak for this cycle. As a result we expect global growth to reach 3.8% in 2018 and then to ease over 2019 (3.7%) and 2020 (3.5%). After hitting a soft patch in Q1, major advanced economy growth rebounded in Q2. Industrial indicators in emerging market (EM) economies are mixed and risk concerns are elevated as some EM financial markets have come under strong pressure, most notably Turkey recently, with some contagion to other EMs. A gradual tightening in advanced economy monetary policy settings is underway.

Australia

Our outlook for the economy is unchanged from last month, though we believe the balance of risks may be shifting to the downside. Growth is expected to rise to just under 3.0% in 2018 and 2019 before slowing a little in 2020. Rising commodity exports, public infrastructure investment and a recovery in non-mining business investment are expected to drive growth. Our outlook for the consumer remains weak, given the headwinds faced by the household sector. The unemployment rate (and spare capacity) is expected to decline gradually, which should see a gradual increase in the pace of wage growth and eventually be passed through to inflation more generally. For now we have left our outlook for rates unchanged, but should the building risks in business sector materialise or wages/inflation growth pickup more slowly than expected, any increase in interest rates could well be delayed. Indeed, recent wage and CPI data suggest inflation pressures remain relatively meek, as do the RBA forecasts updated in the August SMP.

For more details, please refer to the attached document:

• NAB’s World on two pages: August 2018 (PDF, 77kb)