National Australia Bank has delivered a sobering assessment of how it expects the economy to perform this year.

“Looking forward, we see growth slowing sharply as consumer spending comes under pressure from both higher rates and inflation,” NAB chief economist Alan Oster said.

The Reserve Bank has responded to soaring inflation by undertaking one of the most-aggressive interest rate hiking cycles in its history.

Economists warn households will need to absorb a period of both high inflation and rising interest rates, until inflation eventually subsides. During this time consumer demand — which accounts for the majority of gross domestic product or GDP — is expected to slow abruptly.

The National Australia Bank’s economics team now has the Australian economy coming to a virtual standstill by mid-year. “On GDP, we see the quarterly rate of growth slowing to around 0.1 per cent in mid-to-late 2023,” the team noted.