Australian Forward View: Growth and inflation risks move closer to balance

18 June 2026
Economy and Markets

• Recent data flow show that the economy has lost some momentum through H1 2026 and that a gentle uptrend in the unemployment rate has continued.

• Inflation remains elevated and remains a key risk, but headline inflation will peak lower than earlier feared.

• Our forecast for 2026 GDP is little changed from last month and continues to anticipate below trend growth this year.

• Unemployment is still expected to end this year around 4½% and end next year at 4¾%.

The economy has lost some momentum through H1 2026. The national accounts for Q1 show that the underlying trend in consumption growth is closer to ~1.5% annualised than the 2.6% annual growth seen in 2025, and business investment growth outside of data centres has slowed. A fallback in NAB Survey business conditions (though still positive) suggests that softer growth has persisted into Q2.

Inflation continues to track well above the mid-point of the RBA’s target band. While April CPI didn’t show evidence of broad-based passthrough of cost pressures and NAB Survey measures of purchases costs and output costs eased in May, inflation risks remain elevated. We continue to expect the renewed cost shock from the Middle East conflict will temporarily arrest the improving trend in underlying inflation. However, falling refined oil product prices over the past couple of months mean that the magnitude of the cost shock has been smaller than initially feared.

With firmer evidence of slower growth, anticipated cooling in the labour market, and new downside risks from the shift in housing market momentum, we think the data is unlikely to push the RBA to deliver additional tightening. We now see the RBA on the sidelines for the rest of 2026 and anticipate further easing in both capacity pressures and the labour market to drive gradual easing from Q2 2027. 

Click the link below to read the full report.

NAB Australian Forward View June 2026 (PDF, 1MB)