At first glance the headline year-on-year growth rate doesn’t seem too bad at 2.5% (the same as Q3), but this figure is distorted by Q1’s massive surge in exports. When this one-off jump is taken out of the equation, growth is running below 2%. This is well below the historical average, which is around 3%.
Importantly, the economy is still very reliant on exports and the rest of the economy remains flat, which is highlighted by a 0.7% contribution to growth this quarter from exports which was offset by a 0.6% drop in inventories. On the whole, today’s figures support the case for looser monetary policy in Australia.
As we stated earlier AUD had a limited reaction to today’s numbers. AUDUSD dropped initially, before recovering all of its losses and then some. AUDJPY suffered a little heavier due to widespread yen strength in the Asia session, but the pair remains in a medium-term upward trend. In fact, it’s hard to get too bearish on this pair without a confirmed break of this trend, although we may see it test channel support (see chart).
Source: FOREX.com
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