The latest from National Australia Bank, now expecting one rate cut from the Reserve Bank of Australia in 2017

  • Say the RBA will cut in November from the current 1.5% to 1.25%
  • Previously the NAB were forecasting an RBA rate cut in June and September of 25bps each time

NAB reasoning (in brief):

  • Economic activity likely to be solid as we enter 2017
  • Real GDP in Q4 2016 likely at 0.9% q/q
  • Through the remainder of 2017, quarterly growth outcomes likely to be solid
  • Pace of growth to over 3% by Q3 2017
  • Annual average pace of growth for 2017 will be lower, at 2.3%
  • Business conditions have turned up in December and January ... Suggesting the soft patch through much of H2 2016 was a 'mid-cycle' loss of momentum
  • Drag from mining investment reducing
  • LNG exports adding strongly to growth
  • Global backdrop somewhat more supportive

More:

  • We do however remain concerned about the economy's trajectory in 2018, as the contribution from residential construction, LNG exports and temporarily higher commodity prices fade and household consumption remains constrained by weak labour income growth - our year-ended growth forecasts drop to 2% by Q4 2018.