February 20, 2024

The Forward View – Australia: February 2024

RBA on hold with inflation & labour market easing

Our podcast series continues with NAB Chief Economist Alan Oster providing a 10 minute summary of our key forecasts this month. To listen, just click the link below.

If listening on a mobile device, click listen in browser.


  • We continue to see an environment of subdued activity in the near term with the RBA set to keep the cash rate on hold at 4.35% until November 2024.
  • We expect the upcoming National Accounts release to show GDP growth of 1.4% y/y for 2023 – materially below trend but avoiding the worst-case outcomes that might have been expected to accompany a rapid tightening of monetary policy. Strong population growth has been a key support, with per capita GDP contracting materially over the year.
  • Growth is expected to improve slightly in 2024 but remain below trend, before improving to over 2% in 2025. Household consumption will remain the key dynamic but housing and business investment are also likely to be subdued, weighing on growth.
  • The unemployment rate rose to 4.1% in January, though shifting seasonality may have overstated the rise. Nonetheless, the labour market has softened since mid- 2023 reflecting a mix of population recovery and slowing labour demand. We expect a further gradual easing, taking the unemployment rate to 4.5% by end 2024 – notably, still below the pre-pandemic rate.
  • Inflation moderated to 4.2% y/y for 2023 (trimmed mean), marking a very significant improvement from the prior year as global supply improvements have seen goods price pressures rapidly abating. The extent to which this continues remains a key uncertainty but our central case sees inflation returning to just over 3% by end-2024 and near the middle of the RBA’s target band by end-2025.
  • This trajectory for inflation and the wider signs that tighter monetary policy is working to dampen economic activity are likely to be enough to prevent the RBA pursuing further rate rises, but we expect the Board to take a cautious approach to easing policy settings. By November, the combination of higher unemployment and inflation nearing the target range should be enough for the RBA to begin to move, with the cash rate gradually cut back to around 3% by end-2025.

For further details, please see The Forward View Australia (February 2024)