Apr 10, 2012

NAB Lowers Australia GDP Estimate. More Revisions to Follow?

It is starting to hit home that most sectors of Australia's economy are not benefiting from the riches generated by the export of natural resources to China. National Australia Bank, one of the big four banks in the country has lowered its GDP estimate for 2012, saying that

Despite a mining boom, the Australian economy has performed poorly in the first few months of 2012, and policy makers are expecting unemployment to rise in coming months

(See Australian Bank Cuts Growth Forecast For Economy).

The tentative decrease from 3.25% to 3% is quite modest and will most likely be followed by further
cuts unless the RBA proactively reduces interest rates and stimulates credit availability for the manufacturing and services sectors. As we argued before, despite being a developed economy, Australia may soon find itself in Brazil's shoes. The government will likely need to implement preferential access to bank credit for non-mining sectors while the RBA takes measures to curb the appreciation of the local currency.