Banks pundits tip 2017 as year of soft growth
All the economic signs are pointing towards a very flat 2017. A couple of pieces of commentary from different ends of the banking spectrum made that point yesterday.The NAB Monthly Business Survey gave more hints of a moderation in the non-mining economic recovery, although business confidence was still slightly positive. That is, of the business owners and managers surveyed, a small majority still felt more optimistic or neutral about trading conditions and profitability.Nevertheless, there was a slight decline in some sectors, leading NAB economic analysts to comment: "we are becoming increasingly concerned about the underlying momentum in the economy as evidence mounts that the non-mining economy is losing steam. The downward trend in business conditions and signs of weakness in the Q3 National Accounts - beyond one-off influences such as poor weather - lend further support to this view. "For now though, we expect to see a fair degree of 'bounce-back' next quarter, before the economy resumes its relatively subdued growth track, characterised by muted domestic demand."This view of the near-term outlook is significantly weaker than the RBA's. NAB said both the housing construction cycle and commodity exports were expected to peak in the relative near-term, "compounding the challenge to growth further out.""Meanwhile, the rally in commodity prices is expected to be short-lived, and is unlikely to translate into higher investment or wages at this point in the commodity cycle." NAB's chief economist Alan Oster said he still expected the RBA to announce two more 25 basis point rate cuts during 2017 in response to ongoing low inflation and a more subdued growth outlook.The super funds' and ME's principal economic adviser, Alex Joiner, also sees another easing in monetary policy 2017, a year of tepid growth for Australia defined by the presidency of Donald Trump."We see the RBA being increasingly watchful for downside economic risks in 2017," Joiner wrote in the conclusion to a tour of risks in the year ahead, inflation drivers real but two-sided.Joiner dived into one flurry from the last week."Speculation around whether Australia is heading into recession is overblown," he said. "This is because the September 2016 quarter combined some genuine weakness (for example, the rise of just 0.4 per cent, quarter on quarter in household spending) with some temporary impacts. "Foremost amongst the latter was the 1.4 per cent quarterly contraction of dwelling investment. This was unusual given we are in the midst of the largest cyclical upswing in the sector in history. "Yet the statistician reported this was caused by poor weather, which also delayed project work in the non-residential space. Therefore, it can reasonably be expected that a rebound occurs across construction in the next quarter."Consequently, there is a risk of further policy easing. This would be prompted by weakness in growth, decelerating employment growth and/or weaker inflation outcomes. "With rates on hold the RBA would very much welcome some fiscal stimulus but this does not, at this stage, appear forthcoming either. We have long argued that further infrastructure projects should now be