Australia’s GDP likely expanded strongly with growth slightly below trend

Australia's GDP in Q4 is expected to have expanded strongly, with growth slightly below the trend. Apart from a supportive external sector, the nation's domestic demand is expected to have been helped by modest expansion in private consumption, supported by low inflation and a strong labor market. That said, even if retail sales were slightly better  from Q3 in Q4, it is doubtful whether the annualised rate of Q3 private consumption of 3% will  have been matched, Private consumption growth is expected to have weakened slightly  to about 2.5%.

The strength of the drag from the resource investment slump will be the main factor that determines the overall growth of demand. After a huge drop in Q3 that cut the overall gross fixed capital formation by 4% q/q, a moderate reduction is expected.

"A 0.6% qoq expansion in GDP would leave year-on-year growth at 2.7%, which is marginally below the recently reduce estimates for trend growth", says Societe Generale.