The Bigger Picture – A Global and Australian Economic Perspective – January 2016

Global: We have lowered our 2016 global forecasts to 3.0% (from a revised down 2.9% in 2015) in the face of a continuing sharp recession in Brazil, lower commodity prices, global equity market uncertainty and rising spreads – weakness in late 2015 in the USA has also not helped. Global growth continues to disappoint and remains sub-trend as the slowdown continues across many emerging market economies. The latest bout of financial market volatility and sliding commodity prices further illustrate the risks, which have become more weighted to the downside. Nor do we see much sign of a pick up in 2017 (3.3% forecast). These numbers remain significantly lower than recent IMF revised (down) global forecasts.

Australia: The outlook for the Australian economy is essentially unchanged despite global risks and we continue to anticipate further recovery across the non-mining economy. The AUD (now expected to depreciate to USD66c by mid-2016) will continue to act as a pressure valve, the tilt towards services activity will support employment, and lower petrol prices will support the cash flow position of most households and businesses. Resource export volumes will remain strong, although the associated income and government revenue will of course be challenged by low commodity prices. For the RBA, unless financial market volatility translates into substantive negative real economic outcomes offshore, the central bank is likely to remain on the sidelines and observe developments.

 For more details, please refer to the attached document.

• NAB’s World on two pages_January 2016 (PDF, 235KB)