Research and forecast from NAB
AUSTRALIA’S economic performance in the second quarter of 2024 fell short of expectations, but NAB’s growth forecast remains largely unchanged. While the economy is projected to stay below trend for the remainder of this year, a return to trend growth is anticipated by 2025 and 2026.
The labour market is showing signs of easing pressure, with the unemployment rate currently at 4 percent and expected to rise to around 4.5 percent by the end of 2024. This increase is attributed to reduced labour demand driven by strong population growth. Productivity has also declined this quarter, continuing a recent trend. This is partly due to weak mining output and rising public sector employment, which has kept unit labour costs high.
NAB’s current forecast view is the Reserve Bank of Australia (RBA) will cut rates for the first time in May 2025, with a total reduction up to 125 basis points expected over the subsequent year. Despite slower economic growth and a cooling labour market, inflation progress has been slower than anticipated, prompting the RBA to maintain current rates longer than initially planned.
The Australian dollar (AUD) is projected to strengthen against the USD, reaching US69c by the end of 2024 and US75c by the end of 2025. This appreciation is supported by a slowing US economy and anticipated rate cuts by the US Federal Reserve.
In the Goulburn Valley, economic conditions remain robust. Local businesses are adapting to RBA’s interest rate hikes by enhancing efficiency and productivity. Improvements in supply chains are apparent, with growing demand for equipment and better inventory management. In agribusiness, production prospects are strong due to favourable conditions, though price expectations vary across different sectors.
