NAB Group CEO Andrew Irvine said he was confident the tide would start to turn in 2025 amid recent tax cuts being pocketed and the potential for interest rate cuts in the coming months.
“It’s my view that we’re at the hardest point of the economic cycle right now and things will get better from here,” Mr 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.”
While the low point in the cycle may have been reached, Mr Irvine noted pressure would remain on household finances until the economy potentially starts humming again later in the year.
“People are juggling, people are budgeting and they’re budgeting hard to make ends meet every single month,” he said.
“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.
“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.
“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.”
NAB data showed through the Business Survey that business confidence was waning at the end of last year despite conditions holding up okay.
Mr Irvine noted that investment was often pinned to confidence and too often the economy is talked down, when in fact there are plenty of reasons for optimism.
“Optimism for what’s going to happen in our economy this year is important,” he said.
“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.
“At the same time, businesses that focus on value and have really good value lines are 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 also 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.”
Australia is not alone in seeing an economic slowdown, with the global economy weakening throughout 2024.
Heading into 2025, many eyes are on the US as a new president is sworn in, one who has called to sharply raise tariffs.
This is something Australia should be watching closely, according to Mr Irvine.
“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,” he 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.”
