Westpac Chief Economist Bill Evans is out with his forecast for the Australian economy in 2023:
- We continue to forecast a slowdown in the growth profile for the Australian economy from 2.6% in 2022 to 1.0% in 2023 and 2.0% in 2024.
- Sees Household consumption to slow from around 2% (6 month annualised) in the first half of 2023 to near zero in the second half. That would see growth through the year of 1.0%
- first half will benefit from the spill over of the momentum in the second half of 2022 which is expected at around a 4% pace
- Consistent with a depressing outlook for domestic sales and the expiry of the tax allowances in June, business equipment investment is forecast to contract by around 7% in the second half of 2023.
- That hit in 2H will compounded by a contraction in new residential investment and in home renovation activity.
- A six month period of a stagnant economy and no growth in household spending will alert the RBA to the need to ease policy settings in 2024.
- Inflation will be lower in 2024 (at 3%) than the RBA’s current forecast of 3.25%, allowing the RBA to cut rates by around 100 basis points through that year.
- The sharp economic slowdown in 2023 will be partly engineered by the need for the RBA to continue lifting the cash rate in the first half of 2023 as wages growth and inflation remain uncomfortably high and growth holds in at a “respectable pace” – particularly in the opening quarter.
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