September 13, 2019

NAB’s World on Two Pages: September 2019

Global economic growth slowed further in Q2 2019. Major advanced economy (AE) GDP growth declined to its slowest pace since mid-2016.


Global economic growth slowed further in Q2 2019. Major advanced economy (AE) GDP growth declined to its slowest pace since mid-2016. We expect the down trend in AE growth to continue through to early 2020 as the US-China trade dispute and other factors weigh on growth. Growth in the five largest emerging markets economies also slowed, including in India, where growth fell to its lowest level since early 2013. In the face of the global slowdown, central banks are moving to support activity; the European Central Bank cut rates this month and the Fed is expected to follow suit. Global growth of 3.1% is forecast for 2019, before edging up to 3.2% in 2020 (previously 3.3%) and returning to its long-term trend (3.5%) in 2021. Key to the upturn is the support from easier monetary policy and cyclical recoveries in Latin America and India, as well as no further escalation in trade disputes or current geo-political risks being realised.


We have incorporated the latest national accounts data into our growth profile, but have largely left our forecasts for output, prices and the labour market for the next two years unchanged. However, we have revised our forecast profile for the cash rate, incorporating an additional 25bps cut in February 2020, following our prediction of a 25bp cut to 0.75% in November. Further, we see risk of a further cut and a move to unconventional policy should the government continue to hold off providing a more substantial fiscal policy package in the form of infrastructure spending, earlier tax cuts or cash handouts. The national accounts data for Q2 confirmed another soft quarter of growth in the private sector – with the household sector particularly weak, but also weakness in business investment. Growth was supported by a strong boost from exports (LNG) and government consumption in the quarter. Going forward, we broadly expect a similar pattern of growth. We expect the downturn in the dwelling investment cycle to continue, alongside weak household consumption growth. Business investment is expected to rise – including some growth in the mining sector – but there appears to be some downside risk to this forecast with both business confidence and conditions low. Government infrastructure spending as well as general government consumption are expected to be key growth supports. The labour market is expected to deteriorate slightly, which will see wage growth remain weak and contribute to ongoing weak inflation outcomes.

Find out more in NAB’s world on two pages September 2019.