NAB's recent report, The Bigger Picture – A Global & Australian Economic Perspective, forecasts Australian GDP growth to reach 2.8 per cent in 2015-16 and 3.2 per cent in 2016-17.
According to the report, the pace of employment growth has strengthened, stabilising the unemployment rate between 6.0 per cent and 6.3 per cent over the past year.
The report noted there is increasing capacity utilisation, which suggests that 15,000 jobs are created per month. This is enough to keep pace with slower population growth, NAB said.
As a result, NAB expects the RBA to keep the cash rate on hold in 2015, before commencing a gradual tightening cycle in late 2016.
The report also found that consumer spending picked up moderately in the second quarter of 2015, particularly in June. NAB suggested that this partly reflects the recent budget initiatives implemented to encourage small-business spending.
“Against a backdrop of subdued household income growth, we expect a modest pick-up in consumer spending growth through to 2017, underpinned by a gradual decline in the household savings rate,” the report said.
The outlook for mining investment remained negative, with falls in commodity prices putting the viability of marginal projects in doubt.
“Mining investment is declining sharply, public spending is limited and national income growth is weak amidst declining commodity prices,” the report stated.
While dwelling investment is helping to mitigate losses in the commodity sector, its impact is limited due to its small share of GDP, at only five per cent.