Australia: Growth to slow, rates unlikely to change until the second half of 2020 - NAB

Analysts at NAB suggest that they are delaying their expectation for a first rate rise by RBA as the recent Australian data flow suggests that despite robust growth, price pressures remain weak.

Key Quotes

“The RBA also appears more patient than expected, likely waiting for hard evidence of inflation returning to target on an ongoing basis. We have lowered our price and wage forecasts to be more in line with recent experience as well as slightly lowering our expectations for growth.”

“It is important to note that we still see a reasonably robust outcome for the economy. Areas of strength include public sector demand – both infrastructure spending and NDIS-related public consumption. We also expect non-mining business investment to benefit from additional infrastructure spill-overs. Mining is also a still potential upside factor to the forecasts, with that sector now clearly reporting the strongest conditions and confidence. Exports are expected to continue to grow relatively strongly - as the last of the large LNG projects reach full production capacity – and then level off.”

“On a more positive note, recent data continues to indicate strength in the labour market – with our Business survey pointing to ongoing growth in employment of around 20k+ per month.  As a result unemployment could well fall to around 4¾% by early/mid-2019. Thereafter, with growth slowing to around potential, further falls are not expected.”