In a new economic update, The Bigger Picture – A Global and Australian Perspective, it was argued that the gradual recovery in Australia’s non-mining sector is improving.
As a result, NAB forecasts GDP to reach 2.6 per cent in 2015-16 before recovering to 3.0 per cent in 2016-17.
The lower Australian dollar is also supporting exports, particularly services.
“Tourism exports are improving in net terms and we expect this process to continue going forward,” the report said.
In terms of the broader Australian economy, NAB expects the unemployment rate to stabilise in coming months before moving downwards to approximately 5¾ per cent. Lower population growth also suggests that a lower rate of job creation is needed.
“This level of employment conditions points to an annual employment growth of around 200,000 in six months’ time. That said, a substantial amount of spare capacity remains in the labour market, which will continue to weigh on wages growth.”
NAB indicated that low inflation provides the Reserve Bank of Australia with room to ease further, however this would require local demand conditions to deteriorate.
“As such the RBA is expected to remain on hold for an extended period, although we have pushed out the timing of the first hike until mid-2017.”
Globally, there is little indication of acceleration in the pace of expansion, with global growth expected to hover around the 3.0 per cent mark.
“Some factors hanging over global markets have eased for now and this has helped share prices to rise,” the report stated.
“However, the combination of higher US interest rates and lower commodity prices has caused problems in the past for emerging market economies, which have been driving the bulk of global growth since 2009.”
