Australian banks forecast sharper slowdown as fifth RBA rate hike looms
Major bank economists forecast a sharper, longer Australian slowdown, with CBA cutting GDP growth to 1% and NAB projecting unemployment could reach 5.4%.
What you need to know
The Guardian reports major Australian bank economists forecast a sharper, longer slowdown, as the Reserve Bank is widely expected to deliver a fifth rate hike on Tuesday. CBA cut its GDP growth estimate to 1% by mid-next year; NAB projected unemployment might need to reach as high as 5.4%.
- CBA cut its real GDP growth forecast to 1% by mid-next year, from 1.8%
- NAB projected unemployment may need to rise from 4.7% to as high as 5.4% by end of next year
- The RBA is widely expected to deliver a fifth rate hike on Tuesday
- Brent crude has climbed above $US110 from about $US72 a barrel in early July
- AMP's Shane Oliver said home prices could fall as much as 15% before levelling off late next year
Bank forecasts point to deeper slowdown
The Guardian reports that major Australian bank economists expect a sharper, longer slowdown, as the Reserve Bank keeps rates higher to curb persistent inflation. The RBA is widely expected to deliver a fifth rate hike on Tuesday, pushing the cash rate to its highest since 2008.
Belinda Allen, CBA's head of Australian economics, said the extended Middle East conflict, falling house prices and a more aggressive central bank would drive real GDP to 1% by the middle of next year, nearly half the previous 1.8% estimate. Growth through 2027 was projected at barely stronger, 1.1%.
Unemployment and property risks
NAB's Gareth Spence said unemployment might need to rise higher than previously thought to bring inflation under control. He forecast the jobless rate rising from 4.7% to as high as 5.4% by the end of next year; CBA saw it peaking at 5.1%.
AMP chief economist Shane Oliver said home prices could fall by as much as 15% before levelling off late next year, with Sydney values already down 10% from their peak. He said a contraction was not his base case but put the recession risk as high as 45% if the RBA hikes as expected.
Oil and budget pressures
The Guardian reports Brent crude has surged from about $US72 a barrel in early July to above $US110 as the Middle East conflict broadens. Allen said the weaker outlook mainly reflected oil being much higher than expected. The forecasts follow Treasurer Jim Chalmers' warning that the December mid-year budget update would show a more pessimistic outlook.
What do Australian bank economists expect for growth and unemployment?
The Guardian reports CBA cut its GDP growth forecast to 1% by mid-next year and projected unemployment peaking at 5.1%, while NAB forecast growth of about 1% next year and unemployment possibly reaching 5.4%.
Sources & context
- ‘Sharper, longer slowdown’ predicted for Australian economy as fifth interest rate hike looms ↗The Guardian
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