MNI Australia NAB Cuts Jobless Rate Fcast to 5.0% By End-2018

By Sophia Rodrigues

     SYDNEY (MNI) - National Australia Bank has cut its end-2018 forecast for

Australia's jobless rate to 5.0% from 5.1% to 5.2% on the back of its monthly

business survey which suggest continued labor market strength this year.

     The 5.0% forecast for unemployment rate is significant because it is widely

regarded as the full employment rate though in recent months the Reserve Bank of

Australia has expressed doubt whether that rate has fallen.

     But even as NAB economists see an improved outlook for the jobless rate,

they've cut the forecast for GDP growth. NAB economists now expect real GDP to

average 2.8% in 2018 and 2.6% in 2019, down from previous forecast for 2.9% in

2018 and 2.8% in 2019. In 2020, they are forecasting 2.8% GDP growth.

     NAB's business survey for February, published Tuesday, showed conditions

rose to a record high and a bigger positive in the data was employment index

which rose to a record high at +16 points and points to jobs growth rate of up

to 27,000 a month. 

     Interestingly, NAB's employment index had been pointing to job gains of

around 20,000 a month last year when the official Australian Bureau of

Statistics data showed increase of around 33,000. Historically, NAB's employment

index has tended to lead the official data by six months and suggests that the

strength in employment growth will not be ending any time soon.

     NAB's revised outlook for the jobless rate is based on this aspect of the

survey but the economists remain wary about the pace of improvement in wage

growth. This, and how consumers fare amidst slowing housing prices and high debt

levels, will be key determinants to NAB's forecast for RBA rate hikes to begin

in November this year, they wrote in a note Wednesday.

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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