One of Australia\u2019s largest banks has flagged concerns of a recession as the financial impacts of the oil crisis have forced it to increase its economic buffers.<\/p>\n
The National Australia Bank on Monday said it was expecting $706 million in provisions \u2013 which is money set aside for a future liability or credit impairment – due to the volatility in markets.<\/p>\n
The bank also said it has lifted the weighting for its Australian downside economic scenario by 2.5 per cent to 45 per cent.<\/p>\n
This pushes the metric close to 50 per cent as inflation remains elevated above the Reserve Bank of Australia\u2019s 2-3 per cent target band at 3.7 per cent for the 12 months to February.<\/p>\n
Inflation is expected to jump to upwards of five per cent as the impact of the oil crisis is taken into future data sets.<\/p>\n
The CPI data, which will be handed down by the Australian Bureau of Statistics on April 29, will be instrumental in the RBA\u2019s May interest rate call.<\/p>\n
The central bank has noted it is attuned to recession fears while many other economists have warned of stagflation.<\/p>\n
This is where the economy is plagued by soaring inflation, low economic growth and high unemployment at the same time.<\/p>\n
Of NAB\u2019s $706m impairment, the major bank said it was taking a $201m provision for \u201cforward-looking adjustments\u201d, which will cover the impact of the oil crisis on the business sector.<\/p>\n
It said underlying provisions charges are expected to be $406m and flagged an extra $53m in forward-looking adjustments \u201cwhere the expected risk has either not eventuated or is now reflected in underlying provisioning\u201d.<\/p>\n
NAB\u2019s financial performance warning comes alongside other major companies flagging a hit from the oil crisis.<\/p>\n