Australia: Slowing growth with rate cuts ahead - NAB

NAB analysts suggest that following the latest release of Australia’s national accounts data, they are now expecting through the year growth to December 2019 of 2.5%.

Key Quotes

“We have also not changed our forecasts for 2020 at around 2¼. What has however happened – given the new history - is a much larger slowing in year average terms in 2019 – previously 2.4% now 2.1%. However we see the through the year growth numbers as providing a better gauge of growth momentum going forward.”

“We now expect not much improvement in the growth rate in consumer spending in 2019 – at around 2.0% and any improvement in 2020 will need policy action.”

“While the exact timing of cuts is data dependent, we see the RBA cutting rates in July and then November. We believe this would be the path of “least regret” for the bank.”

“We expect that as slower growth and less progress on reducing unemployment take hold at a time of subdued inflation and abating financial stability concerns the Bank will assess it can do more to bolster the economy.  Of course a material deterioration in the labour market in the next few months (not our forecast) could see an earlier cut from the RBA.”