National Australia Bank chief executive Ross McEwan says interest rates will probably begin to drop next year and the economy is set to avoid a recession, even as growth slows.
On Thursday, McEwan told an Australian Lebanese Chamber of Commerce function that he would be “a wee bit surprised” if the Reserve Bank raised interest rates again this year.
NAB chief executive Ross McEwan said it’s likely Australia will avoid a recession.Credit: NAB
“I do feel that interest rates have got to the peak,” he said. “They could [raise rates] but I think at around 4.1 per cent, things are slowing down enough that it’s showing the big tool the Reserve Bank has is working. If we get another one, I don’t think it’ll make much difference.”
McEwan said by next year, interest rates could begin to drop.
“I suspect midway to the latter part of next year, we may even see interest rates coming off a wee bit,” he said. “That’s when we’ll have to get this economy moving again, and there’s always a big lag between the rate changes and for them to work through the economy.”
Loading
While the Australian economy has been slowing, McEwan said it has remained resilient despite 12 interest rate increases within 12 months. He noted this week’s figures showing a slowdown in gross domestic product (GDP) growth, but predicted Australia would avoid a recession, which commonly refers to two quarters in a row where the economy contracts.
“It’s clear that activity has slowed from this time last year, and we saw that in the GDP stats that came out this week,” he said. “There are groups that are really struggling, but what’s been really interesting is that households have been very resilient. I believe that towards the end of next year, we will be talking about an economy that is starting to grow steadily again.”
McEwan said migration would bolster this growth. “The word is that there’s 400,000 people coming to this great country, and it’s very hard to have a recession when you’ve got that number coming over that need somewhere to live, that need the food and that need the services.”