Australia: New risks emerging - NAB

According to analysts at NAB, new risks are emerging for Australian economy and need to be watched.

Key Quotes

“We still expect GDP to increase by around 2.9% in 2018 with strength from mining exports (LNG), public sector infrastructure  investment and a likely flow on to further strength in private investment.”

“We continue to be concerned about the outlook for consumption where wages growth remains subdued (with unemployment still well above the NAIRU), electricity prices high , stalling housing wealth – especially if the authorities effectively tighten credit supply - and high debt levels.”

“There are also new downside risks in the outlook.  First is the increasing potential for trade wars to lower global growth and reduce Australian prospects.”

“Finally there are some emerging signs of softness in the leading indicators on employment growth – albeit our Survey reading would still imply employment growth over the next 6 months of around 20k per month enough to modestly lower unemployment.”

“At this stage we are inclined to still see the balance of risks as neutral but possibly a touch to the downside.  Overall we see upside risks from commodity exports, and infrastructure  offset by risks from consumption. For 2019 we expect growth of 2.9% and 2.6% in 2020.”

“At this stage we also still see the RBA starting to increase rates from mid 2019 – but this is very data dependent and it could well be that the timing may be delayed.”