NAB economists have upgraded their economic growth forecast, with the bank now expecting GDP growth of 1.1% over 2023 and 1.4% the following year.
In NAB’s The Forward View for September, titled Growth to remain subdued despite signs of resilience, Alan Oster, NAB group chief economist, said NAB’s upgraded GDP growth forecast reflected the slightly stronger-than-expected result for Q2, the upward revision to Q1, as well as the slight improvement to the big bank’s outlook for Q3.
“At ~1%-1½%, our expectation remains that growth will be well below trend over the next two years, weighed down primarily by sluggish growth in household spending as inflation and monetary policy weigh on households,” Oster said.
NAB economists said dwelling investment will likely remain weak, but with some support from strong housing demand and higher prices.
When it comes to business, outcomes are expected to be more mixed with the end of the instant asset write off to weigh heavily, but an elevated pipeline of buildings and structures work underway. Also expected to provide key support is public sector spending on infrastructure.
NAB said central to its outlook are the themes of households adjusting to higher rates and inflation but strong population growth supporting aggregate outcomes.
“For now, our transactions data points to resilience in nominal spending for the first two months of Q3 and business conditions remain above average, with capacity utilisation still high,” Olsen said.
NAB’s outlook for the labour market remained unchanged. Population growth rallying at 0.7% per quarter has eased some labour shortages, but the unemployment rate remained very low.
“We see the unemployment edging higher over Q4 to 3.9% before increasing to around 4.9% by the end of 2024,” Oster said. “Inflation is expected to moderate to 4.4% by end-2023 and 3.1% by end-2024. In the near term, Q3 will likely see an acceleration with wage pressure, energy, and services prices offsetting ongoing disinflation in goods prices.”
On the official cash rate, NAB is predicting one last hike in November before the Reserve Bank remains on hold until mid-2024.
“That said, with rates peaking well below most other countries, the risk remains that the RBA stays on hold for even longer,” Oster said.
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