The Australian economy expanded moderately in the third quarter, coming in below market expectations. On a quarter-on-quarter basis, the Australian economy grew just 0.4 percent, as compared with market expectations of a growth of 0.5 percent. On a year-on-year basis, the economy grew 1.7 percent. While the annual growth is higher than the second quarter’s 1.6 percent, at best it can be describe as the gentlest of turning points, noted ANZ in a research report.
The report indicates that softness in the private sector economy has become more entrenched. Overall private sector demand dropped 0.3 percent in the quarter, with housing construction and business investment falling 1.7 percent and 2 percent, respectively.
Consumer spending was especially soft, rising only 0.1 percent in spite of the fact that around two thirds of the AUD 7.2 billion tax of cuts look to have been paid out. Income tax payments dropped 6.8 percent quarter-on-quarter, helping stimulate household incomes by 2.5 percent quarter-on-quarter and 5.1 percent year-on-year, the highest annual growth since the third quarter 2014. However, increased consumer caution has driven households to save most of this, and the household saving rate rose to a two-year high of 4.8 percent.
The public sector continues to be the main driver of growth, contributing 0.3 percentage point to quarter-on-quarter GDP growth and 1 percentage point to annual GDP growth. Net exports contributed 0.2 percentage point.
“With growth so narrowly based, the outlook for the economy remains very uncertain. There are few reasons to hope for a short-term recovery given that investment plans have been cut, housing approvals are still trending lower and consumer confidence remains in the doldrums. It seems inevitable that the economy will require further policy stimulus to lift it out of its current funk”, added ANZ.
