Growth in Australia appears to likely to be stuck around 2% pace – Westpac

During the early Asian morning on Tuesday, the National Australia Bank released figures for its January month Business Confidence and Conditions. Based on the outcome, analysts at Westpac reiterate their call that the Aussie economy will grow by 2.0% during 2020.

Key quotes

Business confidence has evaporated and business conditions have stabilised at weak levels, suggesting that the economy is trending sideways - stuck in the slow-lane.

These were the key messages from the private business surveys late in 2019. They remain the key messages as the 2020 year begins - as evident in the NAB survey for January, which was conducted from January 21 to February 3.

The lack of confidence is understandable given the subdued economic backdrop, as well as recent events, notably the bushfires and the outbreak of the coronavirus in China, our number one trading partner. That points to the risk of weak equipment spending in coming quarters.

As to business conditions detail for January: trading conditions fell by 1pt to +4; profitability rose by 1pt to a still weak +2; and employment conditions fell by 3pts to +1.

In summary, the private business surveys remain consistent with our view. Growth in Australia having slowed to 2% in 2019 appears likely to be stuck around this 2% pace in 2020 (albeit with some volatility over the first half of the year associated with the significant impacts from the coronavirus).

We assess that policy stimulus is providing some support to activity but that the economy continues to be impacted by powerful headwinds, notably: weak wages growth; high household debt; the ongoing home building downturn; and a subdued and uncertain global backdrop.