The Australian economy is struggling to navigate away from mining-based growth, resulting in a revised GDP forecast of 2.4 per cent for the year.
According to a report by NAB – The Bigger Picture: A Global & Australian Economic Perspective – the GDP forecast for 2015-16 has been revised down to 2.4 per cent, while the 2016-17 forecast remains unchanged at 3.1 per cent.
While the Australian economy is experiencing relatively low-level growth, NAB indicated that there is evidence that growth momentum is beginning to broaden out across the sectors.
“Against that, there is increasing evidence that growth momentum is broadening across the non-mining economy – not limited to the dwelling sector – in response to the lower AUD and interest rates, with improvement particularly evident in service sectors,” the report said.
NAB stated that the depreciating Australian dollar and lower interest rates are helping to offset the slowdown in mining.
“Gross value added in services industries such as ITC, finance and insurance and hospitality was solid in Q2.
“Net tourism exports continue to expand and business conditions and capacity utilisation are trending up, despite the understandable dip in confidence amidst global volatility,” said NAB.
NAB reported that the unemployment rate is expected to stabilise in coming months, and slowly decrease to around 54 per cent by the end of 2016.
“Nevertheless, ongoing spare capacity in the labour market is evidenced by the slowdown in wages growth. Average compensation per employee grew just 0.2 per cent in the June quarter and 0.5 per cent over the year,” the report stated.
The report also found that although risks to Australia’s economic outlook stem from market volatility and slower growth in China, stronger momentum in non-mining sectors is expected to keep the Reserve Bank of Australia from cutting rates.