The poor outlook for commodity prices has prompted NAB to downgrade its real GDP growth forecast, cutting it to 2.7 per cent in 2016 and 3.0 per cent for 2017.
In a recent economic update, NAB said downgraded commodity price forecasts have pulled down GDP expectations for 2016 from 2.9 per cent to 2.7 per cent.
NAB found that although GDP has been revised down, there is evidence of a gradual cyclical recovery across non-mining sectors of the economy.
“Services industries servicing both households and business are faring well, while retail and hospitality are benefiting from a slightly less cautious consumer and net tourism inflows.
“This tilting composition of growth towards more labour-intensive areas will support the labour market.
“In the September quarter, net exports were the major driver of GDP growth, primarily due to higher resource volumes – although there are signs that the lower AUD is supporting other exports, particularly in services,” the update said.
The latest ABS labour force data was an “upside surprise”, said NAB, resulting in a fall of the unemployment rate to 5.9 per cent from 6.2 per cent.
NAB said there is likely to be an improvement in the unemployment rate. NAB expects unemployment to ease gradually to 5.8 per cent by the end of 2016 and 5.7 per cent by the end of 2017.
Commenting on global growth, NAB said this has remained stagnant at around 3¼ per cent since 2012. This is a result of falling commodity prices, capital flow reversals and quantitative easing by central banks to target inflation levels.
These factors “take a toll on the pace of expansion in the big emerging market economies that have underpinned most global growth”.
The update said the forecasts for global growth remain unchanged – 3.0 per cent in 2015, 3.2 per cent in 2016 and 3.3 per cent in 2017.
Economists agree that the Reserve Bank is likely to remain in inflation fighting mode until December. ...