NAB’s World on Two Pages: November 2019

Hopes of a US-China ‘Phase One’ trade agreement have lifted financial markets. While in Australia we’ve lowered our near-term forecast for growth.



Hopes of a US-China ‘Phase One’ trade agreement have lifted financial markets. While it is unclear if existing tariffs will be rolled back, should a deal be agreed it would suggest a lower risk of an extreme tail event and may lift business confidence. Less clear is whether the drag on business investment from the unclear nature of future trading relationships will change. Expectations of further major advanced economy monetary policy easing have been dialled back, but the recent easing that has been put in place is likely to remain for an extended period. Major AE growth appeared broadly steady in Q3 but we expect further slowing through to mid-2020 – with subdued growth in the Eurozone, further slowing in the US and a turn for the worse in Japan (in part due to the increase in its Value Added Tax). Our forecasts for global economic growth are unchanged this month – we expect the global economy to expand by a sub-trend 3.1% and 3.2% in 2019 and 2020 respectively, before returning to the long-term trend of 3.5% in 2021. Recoveries in Indian and Latin American growth are the key contributors to the 2021 upturn.

This month we recorded a podcast to accompany the Forward View – Global, giving you a 10 minute summary of our key forecasts. To listen, just click the link below.



We have lowered our near-term forecast for growth and now expect 0.3% q/q (1.5%y/y) for the Q3 national accounts (released next month). We have also delayed out expectation for the next reduction in the cash rate to February 2020 (from November). Beyond that, the shape of our forecasts is unchanged. We continue to expect weak private domestic demand with weak growth in household consumption and a significant decline in dwelling investment. Business investment is expected to rise though there are some risks around this, with confidence and conditions low. Offsetting the weakness in the household sector will be a continued rise in exports in the near term and ongoing high levels of public sector investment and spending. Overall, we now see growth of 1.6% this year, before a small improvement – but below trend rates – of 2.1% in 2020 and 2.4% in 2021. With growth remaining below trend, we see a slowing in employment growth and an uptick in the unemployment rate. As a result, wage growth is unlikely to see much of an improvement and overall inflation will only reach the bottom of the target band by end 2021. We see the need for further stimulus, and while we have changed our call to February, think the next rate cut should come in December. There is also a clear role for more fiscal support.

Our podcast series to accompany the NAB Forward View – Australia continued this month, giving you a 10 minute summary of our key forecasts.  To listen, just click the link below.

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