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NAB Group CEO Andrew Irvine released a statement on behalf of the major bank, saying that Aussies should expect some relief after economic troubles plagued many throughout 2024.
“It’s my view that we’re at the hardest point of the economic cycle right now and things will get better from here,” Irvine said.
“We’re seeing tax cuts for Australians that most are actually saving, so deposit balances are increasing in the sector, which I think is promising. And we do expect interest rates to start to fall by the middle of this year. We’re then expecting two further cuts during the year.”
With potential interest rate cuts and a federal election expected to shake things up, 2025 is set to be a big year for Australia. NAB has recognised right now as the hardest point of economic pressure, with challenges set to ease.
“People are juggling, people are budgeting and they’re budgeting hard to make ends meet every single month,” said Irvine.
“The big thing for us is employment and the strong employment market conditions throughout Australia and the minimal amount of unemployment. Typically, in my experience, as long as people have jobs and there is income coming into the household, most bills, most mortgage payments are met, and the worst doesn’t happen.”
According to Irvine, a rate cut will be the sigh of relief Aussies are after and this decision will mark the beginning of the end of the major economic challenges of recent years.
“My prediction is that over the course of the year, it’s going to be slow and measured improvement. And when we get that first rate cut, I think it’s going to have a significant impact on the psyche of consumers, as well as business people that is likely far greater than the actual impact it will have on cashflow,” he said.
“I think that at the back end of this year you’ll start to see good growth. Businesses are confidence players and frankly consumers also, and I just think it will create a positive environment for spending and for employment as well.”
Further to the wider population doing it tough, so too have SMEs. NAB said that this year will bring a sense of optimism back to both consumers and business operators.
“SMEs are the heartbeat of our economy. Thankfully, in many sectors, SMEs continue to be doing well. Regionally, businesses in Queensland, WA, NT are doing well. Businesses that support the resources sector, energy, agriculture, defence – these are large tracts of our economy that are doing well,” Irvine said.
“At the same time, businesses that focus on value and have really good value lines are also trading really well. If you’re a business that serves luxury goods or you’re a restaurant that people want to go to and be seen at, those types of businesses are trading really, really well.
“It’s businesses that have skews that are in the middle, where they’re seeing a downgrade to value and that’s then compressing their margins. And I think that’s where we’re seeing the most pressure in our client base with SMEs.”
Despite this optimism, there are some factors that could stand to disadvantage our economy. The election of Donald Trump in the US is one major hurdle, with looming worries of a “trade war” placing added pressure.
“We will have to see how Mr Trump’s comments about increasing tariffs play out over time, but it’s clear no one wins in a trade war,” Irvine said.
“What gives me optimism is that over the past four or five years, many Australian businesses have diversified their markets. We have seen terrific diversification not just in commodities and agriculture but across all sectors. That puts Australia in a stronger relative position.
“This is testament to the hard work and achievements of many small and medium businesses. We’ve got good products and services to sell, and I continue to be optimistic.”
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