Global

Global inflation remains high and showing no signs of easing, placing pressure on household finances. Together with central bank interest rate rises, this is likely to slow growth. The speed and degree of policy tightening may prove too much for economies to handle, particularly given the commodity price shock currently in play. As a result, recession risk for several of the major advanced economies, including the US, is uncomfortably high. China is also starting to see a recovery in activity as restrictions have been eased although there is considerable uncertainty around the outlook given the continuation of zero-COVID health policies. Our forecast for global growth is 3.4% in 2022, 3.2% in 2023 (previously 3.4%), and 3.1% in 2024; note, however, that we are currently reviewing our US forecast in the light of this week’s Fed meeting.

Australia

For Australia, we have lowered our GDP forecast for this year and next, upped our near-term inflation outlook and incorporated a new, front loaded rate track for the RBA. Our outlook for the labour market is broadly unchanged in the near term, with unemployment expected to continue to decline and wage growth to pick up, but we have increased the unemployment rate profile further out. GDP is expected to now grow at 2.7% this year, a below trend 1.8% in 2023 and around 2.0% in 2024. The strength in labour demand indicators still provides us confidence that the unemployment rate will decline in the near-term, though a weaker growth outlook in the out years sees unemployment back up to around 4% by end 2024. We have also upped our inflation forecast over the next two quarters, which sees headline CPI peak at around 6.3% in Q3 and trimmed-mean inflation at around 5%. This, in combination with the RBA’s post meeting statement mean we now expect a front-loaded rate track, with 50bp hikes expected at each of the next two meetings with a 25bp follow up in November. We see the cash rate at around 2.6% by end 2023.

Find out more in NAB’s World on two pages (June 2022)