Australia: Real GDP growth is expected to ease ahead – NAB

Research Team at NAB, notes that the Australian economy grew at a year-ended rate of 3.3% in Q2, the fastest pace since mid-2012, thanks to a surge in government spending but the real GDP growth is expected to ease, most clearly in 2018 after the dwelling cycle has turned and resource exports no longer contribute to growth.

Key Quotes

“Our forecasts are for real GDP growth of 3.0% on average in 2016, followed by 2.8% in 2017 and 2.6% in 2018. The unemployment rate is expected to hold steady through the forecast horizon at around 5.6-5.7%, a rate which indicates ongoing spare capacity in the labour market.

There is some downside risk to our near-term forecasts given the recent loss of momentum in indicators of household spending in particular, but also business conditions. These bear close watching. The RBA will hold steady in the near-term, but two cuts are likely to follow in mid-2017 as low inflation persists.”