What NAB and Macquarie’s outlooks imply about Australian economy
This week, two prominent Australian banks – National Australia Bank (ASX:NAB) and Macquarie Group Limited (ASX:MQG) – came out with their financial numbers for 1H FY22 and FY22, respectively. For the year ended 31 March 2022, Macquarie Group recorded a profit of AU$4.7 billion, reflecting a 56% spike over the same period last year, while its net operating income jumped 36% year on year (YoY) to AU$17.3 billion.
On the other hand, NAB reported a net profit of AU$3.55 billion for 1H FY22, a 10.6% YoY jump, while net operating income surged 4.6% on a yearly basis to AU$8.82 billion.
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What NAB outlook show about Australian economy
Talking about the economic outlook, NAB said its strong performance clearly indicates an ongoing strengthening of the Australian economy. Consumption has rebounded quite sharply from the COVID-19 period and is expected to remain robust. In the light of a strongly recovering economy, the banks also forecasted the GDP growth of the country at 3.4% for 2022 and 2.1% over 2023, supported by high levels of dwelling investment and government spending.
Given the strength in activity and labour demand, NAB expects the unemployment rate to fall below 4% in the coming months. Overall, the bank is optimistic about the growth outlook and investments. it is making position at the fastest rate since the global financial crisis in 2008, according to NAB.
The outlook has now shifted to a period of higher growth, higher inflation and higher interest rates, prompting reassessment of its targets to ensure appropriate balance of cost discipline against growth opportunities.
Macquarie’s cautious stance
Coming to Macquarie Group, it was also seen making similar remarks about the economy as a whole, having seen improvement in overall economic sentiment and market condition. MQG expects the growth to remain strong at least for the near term, however, the recent escalation of geo-political tensions amid the Russia-Ukraine war has remained a concern for the bank.
MQG said “the invasion of Ukraine and further outbreaks of COVID-19 add to already high inflationary pressures and increase the likelihood of interest rate rises in many advanced economies.” This has also led MQG to skip providing guidance for FY23; however, it said that it will be maintaining a cautious stance with a conservative approach to capital, funding and liquidity in the current environment.
Many economies have been faring decently well in their quest to recover from the COVID-19 impact. However, the cost-push inflation primarily caused by Ukraine-Russia war, has left little room for central banks to keep interest rates low for long now.
In fact, the RBA recently made its much-anticipated move to increase interest rates for the first time in 11 years, by 25 basis points to 35 basis points.