The Forward View Australia - Goldilocks on hiatus

21.11.2025

NAB economists still expect a soft landing for the Australian economy, though see the RBA on the sidelines with growth already at trend and little-to-no spare capacity in the economy.

• NAB Business Survey shows the economy held – and possibly gained – momentum in Q3.
• Quarterly CPI confirms stronger inflation; unemployment dipped to 4.3% in October.
• A soft landing still expected, with growth at trend and little spare capacity, keeping the RBA on hold.

The Forward View Australia, by NAB Economics & Markets Research, provides detailed forecasts and analysis of Australian economic conditions. In the November 2025 publication, NAB economists made only small tweaks to the 2026 growth forecast and the unemployment rate forecast.

Overview

Overall, we continue to see a relatively soft landing for the economy, with only small tweaks to our 2026 growth forecast (slightly softer) and unemployment rate (slightly higher) forecast over the past month. Q3 inflation data was stronger than the RBA's expectations and confirmed a material and broad-based acceleration from its H1 2025 pace. We expect underlying inflation above 3% for the next couple of quarters, before easing back into the target band and moderating a little further to 2.5% over 2027.

With economic growth expected to sustain near trend, the unemployment rate to remain low, but a less benign inflation back drop, we see the RBA on hold at 3.6% for the foreseeable future. Abstracting from a negative global shock, the key risk for the RBA and the interest rate outlook is clearly that capacity constraints broaden or intensify.

Indeed, the latest NAB Business Survey for October shows that business conditions increased further in the month, and that capacity utilisation remains well above its long-run average. Encouragingly, input cost growth, as well final product price inflation, are tracking around their long-run averages. Early evidence of margin expansion may pose some threat to this benign outcome.

Data over the next couple of months will be crucial in assessing how underlying trends in the economy are progressing on the demand side following the volatility in key data points over recent months.

Though dated, the Q3 national accounts (where we expect overall growth of 0.5% qoq) will provide an updated and complete picture of household sector dynamics including income growth, as well a broader perspective on growth– including dwelling and business investment. Fresh reads for the labour force survey and household spending will provide greater clarity around the ongoing (or otherwise) resilience and capacity of the labour market as the impact of private sector activity flows through, and the durability of the consumer recovery. The first full monthly CPI is released next week and will provide a more granular picture of recent inflation trends amid the spike in Q3.

Read the full report here, Forward View Australia.

Economy