Australia: Economy to gather some speed through 2018 - NAB

Tony Kelly, Senior Economist at NAB, notes that Australia’s full-year economic growth in 2017 came in at a relatively subdued 2.3%.

Key Quotes

“The good news story through 2017 was the long-awaited uplift in non-mining business investment, as well as a strong contribution from government infrastructure investment, although consumer spending disappointed and dwelling investment peaked. We see the economy gathering some speed through 2018, as business and government investment, as well as LNG exports contribute to growth. As a result, we see annual average growth of 2.8% in 2018, followed by 2.6% in 2019 and 2.8% in 2020.”

“With growth running slightly above potential, spare capacity should gradually be eliminated, resulting in the unemployment rate tracking down and wages and inflation pressures gradually picking up. The RBA will not hike rates until there is comprehensive evidence that wages growth/inflation is moving in the right direction. At this stage, we have the first hike pencilled in for November 2018, with some risk that it occurs later.”