Australia's recent economic data may have been only "meh," but some economists see dark clouds on the horizon, spurring sharp cuts to growth forecasts.
"The economic transition in Australia from the Resources Boom to [housing-led] East Coast Recovery has stalled," Morgan Stanley said in a recent note. "The combination of deeper than expected terms of trade shock and the missed opportunity to springboard consumer spirits off the housing recovery leave the near-term growth profile anemic."
The bank cut its forecast for gross domestic product (GDP) growth next year to 1.9 percent, compared with consensus forecasts for around 2.9 percent. It only expects a slight recovery in 2016, to just 2.2 percent.
"Our base case now assumes a material growth slowdown, in conjunction with greater than expected deterioration in labor market conditions," Morgan Stanley said.
"Unless the monetary and fiscal backdrop turns more stimulatory, Australia could well face its first recession in a quarter-century," the note said.
The bearishness is at odds with relatively benign economic data recently. The Australian economy added 24,100 jobs in October, better than the 22,500 forecast by Reuters, after two months of declines, data showed Thursday. Earlier in the week, retail sales data for September came in better than expected, rising 1.2 percent from August, indicating consumption hasn't faltered.
In its quarterly policy statement released early Friday, the RBA kept its growth forecasts unchanged, forecasting 2.5-3.5 percent growth for 2015 and 2.75-4.25 percent for 2016. The central bank expects declining mining investment will subtract 1.5 percentage point from GDP in 2015.
But Morgan Stanley isn't alone in its below-consensus forecast for economic growth.
"The next couple of years will see mining investment drop quite sharply," said Daniel Martin, an economist at Capital Economics. "That was the real driver of Australian outperformance during the Global Financial Crisis. It was the driver for much of the last decade."
He's been forecasting economic growth would fall to 2 percent next year, adding he doesn't believe consensus expectations for 3 percent are realistic.
"So far, there's not enough signs that the rest of the economy has made up enough to counter [the mining-investment dropoff]," he said. "Households still have a lot of debt. They don't seem to be very eager to spend."
Martin doesn't expect the Reserve Bank of Australia (RBA) can ride to the rescue with interest rate cuts either.
"The thing they're worried about is that housing prices are increasing rapidly and with interest rates low, quite a lot of people are buying houses for investments," he said. "Normally, that points to speculative buying and possibly a bubble."
To be sure, there are others more sanguine on the outlook.
"The anecdotal evidence is things are going okay," Chris Weston, chief market strategist at IG, said. "The RBA is not concerned, housing is growing, retail sales are very strong, exports as a percentage of GDP are very strong," he said. "The mining sector is slowing quickly – as the RBA has mentioned – but there are signs the non-mining space is finding some footing."
He expects the RBA will upgrade its view in its statement Friday.
—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1