Analysts at Westpac, note that the Australian economy grew by a disappointing 0.4% in the September quarter for annual growth of 1.7% and was slightly below the market consensus forecast of 0.5% and the Westpac forecast of 0.6%.
“Of most concern is that this represents the fifth consecutive quarter where private final demand, which declined by 0.3% in September, either contracted or was flat.”
“Within private final demand the most surprising undershoot was household consumption, which expanded by only 0.1%. While volatile, we assess trend household consumption growth at around 2.7%yr. However over the last year household consumption has grown by only 1.2%.”
“The contraction in the dwelling construction cycle continued into the September quarter. New dwelling construction contracted by 2.8% to be down by 11.0% over the year. Complemented by an annual fall of 7.1% in alterations and additions, total dwelling construction is down by 9.6%.”
“Growth continued to be boosted by public demand (+1.7% for the quarter and 5.2% for the year).”
“The Federal Government and the Reserve Bank will be disappointed with this result. A lift in annual output growth from 1.6% to 1.7% is hardly a “gentle turning point” when private final demand contracted by 0.3% following a 0.1% contraction in the June quarter.”
“RBA rate cuts have had some impact with house prices lifting nationally by 2.3% (including 3.5% in Sydney and Melbourne) in the September quarter. This turnaround has clearly failed to boost spending in the quarter although any wealth effect is likely to have substantial lags.”
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