Australia: GDP supported by solid non-mining activity – NAB

Research Team at NAB, suggests that the Australian real GDP continues to be supported by solid non-mining activity and strong growth in the volume of LNG and services exports.

Key Quotes

“Consistently above-average business conditions in non-mining appear to supporting business confidence (despite Brexit), which is encouraging as we enter a period of political uncertainty. The divergence between mining sectors and geographies is increasingly stark however, with low commodity prices to be an enduring feature.

Our real GDP forecasts are 2.9% for both 2016 and 2017 and to 2.5% in 2018. The unemployment rate eases to just above 5½% in coming quarters, then holds steady before drifting up to 5.8% in 2018. Meanwhile, low wages growth and weak commodity prices are consistent with a subdued inflation outlook and are a testing combination for government revenue, as evidenced by S&P placing Australia’s AAA credit rating on negative outlook.

Our central case remains for the RBA to hold, although this is data dependant and the central bank is keeping its options open. Brexit will have minimal direct effect given Australia’s goods trade has re-oriented to Asia, although services trade and investment flows are larger.”