What does the Australian economy look like in 2012?
Australia is far from immune to the Euro-zone crisis, but while the global economic outlook is increasingly precarious, Australian forecasts for 2012 are cautiously optimistic.
NAB’s Economics Team offers the following insights for the coming year:
“The likelihood that inflation will stay within the 2-3% target band over the next two years provided the Reserve Bank of Australia (RBA) with scope to reduce the official cash rate by 25 basis points for a second consecutive month in December, taking the official cash rate to 4.25%. And we continue to pencil in another reduction in the cash rate in February, on the basis that a further modest stimulus may be desirable.
“The outlook for business investment remains very strong – largely due to investment in the resources sector – which should continue to support growth over the next year or so. In financial year terms, our GDP growth forecasts have been strengthened in 2012-13 to reflect stronger consumption and business investment:
- 3.7% in 2011/12 (was 3.2%) and
- 3.8% in 2012/13 (was 3.3%).
“The unemployment rate remains slightly above 5%. However, as activity picks up in early 2012, so should employment growth and we expect the unemployment rate to drift down below 5% by the end of the year.
“Annual average wage growth is currently running at 3.7% (wage price index, private sector), and we see little reason to expect any slowing in this or other fundamental wage series.
Consumer demand and housing
“Although saving rates are high and consumers remain cautious, consumption growth is expected to be fairly solid in response to rising household incomes in early 2012.
The Australian Bureau of Statistics (ABS) reports that the housing market continues to soften, and that housing remains least affordable in Sydney, and most affordable in Tasmania.
Established house prices fell further in the September 2011 quarter, with the weighted
average of the capital cities falling by 1.2%, to be 2.2% lower over the year.”
Mining and resources
“Mining capital expenditure is estimated to have risen by around 34% in 2010-11 and, using five-year average realisation ratios, is expected to rise by a further 84% in 2011-12. The data implies particularly solid increases over the next two years, increasing by more than seven-fold since 2004-05.
Even using the five-year minimum realisation scale LNG projects could expand Australia’s production capacity by up to four-fold over the next few years.
The boost to capacity in the resources sector will place some downwards pressure on commodity prices in the medium term.
As the global growth outlook becomes increasingly uncertain, commodities perceived to have safe haven properties, such as gold, should continue to benefit from market fragility and investor risk-off attitudes.
Fluctuations in the iron ore price have been particularly striking of late as markets respond to concerns of a potential economic slowdown in China.
Markets will remain focused on European sovereign debt issues, although attention has also been shifting towards emerging economies as skepticism grows over their capacity to weather the global headwinds.
|Fiscal Year||Calendar Year|
|2011-12 F||2012-13 F||2011 – F||2012 – F||2013 – F|
|Underlying business fixed investment||28.3||14.5||20.4||22.3||12.5|
|Underlying public final demand||-2.3||-0.5||-0.6||-1.5||-0.3|
|- Non farm GDP||4.0||3.9||2.3||4.5||3.4|
|- Farm GDP||-9.4||-1.0||-7.6||0.7||-2.4|
|Federal budget deficit ($b)||23||10||30||17||NA|
|Current account deficit ($b)||43||76||32||65||81|
|(-%) of GDP||2.9||4.7||2.2||4.2||4.9|
|Terms of trade||2.7||-7.7||14.4||-8.6||-1.6|
|Av. earnings (Nat. Accts. basis)||5.8||4.8||5.5||5.1||4.6|
|End of period|
|Core CPI (exc. carbon)||2.1||2.9||2.4||2.8||3.1|
|- Core CPI (inc. carbon)||2.1||3.2||2.4||3.0||3.3|
|RBA cash rate||4.00||4.50||4.25||4.00||4.50|
|10 year Govt. Bonds||5.00||5.25||4.75||5.25||5.25|
|$A – Trade weighted index||1.05||71.4||75.1||73.7||70.7|
The advice contained herein does not take into account any persons’ particular objectives, needs or financial situation. Before making a decision regarding the acquisition or disposal of a financial product, persons should assess whether the advice is appropriate to their objectives, needs or financial situation. Persons may wish to make this assessment themselves or seek the help of an adviser. No responsibility is taken for persons acting on the information provided. Persons doing so, do so at their own risk. Before acquiring a financial product a person should obtain a Product Disclosure Statement (PDS) or other disclosure document relating to that product and consider the contents of the PDS or disclosure document before making a decision about whether to acquire the product. National Australia Bank Limited ABN 12 004 044 937, registered office 500 Bourke Street Melbourne VIC 3000, is an Australian Financial Services Licensee and member of the National Australia Bank group of companies. From time to time National Australia Bank Limited, members of the National Australia Bank group of companies, associated employees or agents may have an interest in or receive pecuniary and non pecuniary benefits from the financial products and services mentioned herein. ©2012 National Australia Bank Limited ABN 12 004 044 937