Australia: Q2 Real GDP expanded by a solid 0.9% - Westpac

Analysts at Westpac note that Australia’s real GDP expanded by a solid 0.9% in the June quarter and annual growth printed 3.4% while the market expectations for annual growth to the June quarter were 2.8%.

Key Quotes

“That 0.6 percentage point “miss” was due to upward revisions to growth in the September/ December and March quarters totalling around 0.4 percentage points and a “miss” for the June quarter of 0.2 percentage points.”

“Overall growth in domestic final demand in those three earlier quarters was revised up from 2.3% to 2.9%.”

“The themes behind the revisions to the earlier quarters were around previous under estimates of dwelling investment and household consumption.”

“The income and production estimates of GDP, printing at 0.9% and 1.0%, provided the upside surprises and explained the 0.2% “miss” in the markets’ estimates.”

“The report signals that growth in the economy over the past year has been significantly stronger than we had been led to believe and, indeed, comfortably above the generally accepted measure of potential growth of 2.75%.”

“Employment growth in 2018, to date, has slowed to an annualised pace of 1.7%, moderating from 3.5% in 2017. Political uncertainty, coupled with concerns around the global economy, are likely to weigh further on employment growth going forward.”

“The Reserve Bank will feel comfortable with these accounts. With the first two quarters of the year running at a 4% annualised pace its forecast of 3.25% growth for 2018 looks to be within reach.”

“However, the policy debate has already moved on to 2019. Uncertainty about the global and political outlook, as well as the likely pressures we can see building for the household sector, continue to question whether the Bank’s expectation of another year of growth which is comfortably above trend can be delivered.”