Even though business conditions remain weak and confidence is struggling higher, NAB economists are more upbeat on the outlook for the Australian economy – but with the major proviso that we don’t know the impact from the second wave of infections in Victoria and more recently in NSW.
In an updated set of forecasts released yesterday, the NAB economic team says the Australian economy’s second-quarter decline may not be as bad as initially feared.
But unemployment won’t return to levels at the start of this year (around 5.2%) until well into 2023.
Unemployment and jobs get an update later today from the June Labour Force data from the Australian Bureau of Statistics.
That’s because economic activity has rebounded more quickly than expected since the lows of March and April, with internal consumption data suggesting consumption in late June is already back to early 2020 levels.
The bank says that suggests the June quarter GDP might now fall by around 5% compared with its previous expectations of an 8.5% contraction.
The forecast for 2020 growth is now a 1.75% decline in GDP, revised from a previous estimate for a 4.3% drop.
The bank is expecting a bounce of around 3% in the third quarter – or 4% without the Victorian virus return.
“Normally that would see Q3 expectations revised up but now we are trying to take on board the extent and length of the Victoria lockdown,” the NAB economists wrote yesterday.
For 2021 NAB is expecting growth of around 1.6%- but 2.5% through the year as activity strengthens as the year goes on – while 2022 forecasts are unchanged at around 2.75%.
“That means that GDP gets back to pre-COVID levels by late-2021,” NAB said.
The update also forecasts a lower peak unemployment rate this year of a touch over 8%, but still around 7% by late 2021 and a touch below 6% by late 2022.
In other words, unemployment won’t back to pro-COVID-19 levels until 2023.
Nominal wage growth is still expected to be around 1% next year and inflation still around 1.5% by late 2022 – and the RBA on hold.
“We continue to expect a gradual phasing out of JobKeeper (or a replacement targeted at poorer performing industries). Also, we don’t see JobSeeker payments fully scaled back to “Newstart” levels,” the bank said.
We could know about that in the July 23 economic update or the federal budget in October.