NAB Chief Economist Dr. Sally Auld recently appeared on the Fear and Greed podcast to discuss Australia's economic outlook following the release of national accounts and GDP data. Despite some expected improvements, Dr. Auld indicated that the Australian economy might face another year of below-trend growth in 2025.
Dr. Auld remarked, "We are going to have to lower our sights on the potential trajectory for the Australian economy through 2025." She noted that early indicators suggested weaker-than-expected consumption data, which has now been confirmed by recent GDP figures. "Today’s [GDP] number, which is disappointing, does suggest the economy is struggling to get up some genuine momentum as we start 2025," she said.
Factors contributing to these numbers include unusual weather conditions and anomalies in how electricity subsidies are accounted for in national statistics. Nonetheless, Dr. Auld emphasized a broader picture of modest growth: "We are in for another year of sub-trend growth here in Australia, albeit growth that’s a bit stronger than it was last year."
Regarding private sector investment, Dr. Auld acknowledged some positive developments but expressed caution about their sustainability: "It is a bit sluggish... Government spending was a bit softer in the quarter, and private spending... was a little stronger." However, she warned against assuming this represents a lasting trend.
Productivity remains an area of concern with no improvement observed in early 2025. Dr. Auld stated, "Productivity was flat in the quarter... We’re not really generating any growth from using the inputs into production... more efficiently."
Interest rates are expected to decrease further as the Reserve Bank aims to support economic activity. Dr. Auld predicted continued rate cuts: "They [RBA] don’t want interest rates at a level where they’re exerting a headwind on the overall economy." NAB forecasts three additional rate cuts starting in July.
The full conversation with Dr. Sally Auld can be accessed through the Fear and Greed podcast.