Felicity Emmett, senior economist at ANZ, suggests that after the release of key partial indicators this week for the Australian economy, they are expecting a rise in GDP of 0.6% q/q in Q3 whch would see annual growth lift to 1.7%.

Key Quotes

“This is in line with our preliminary estimates released last Friday, with the impact of the partial data this week netting out. The main new pieces of information since then are weaker inventories, profits, and sales volumes, offset by stronger government spending and net exports.”

“Once again, private demand looks to have been very weak. We estimate a rise of just 0.1% q/q, which would leave annual growth in negative territory at -0.2%. The mainstay of economic growth remains public demand, which looks to have contributed 0.35ppt to quarterly growth. This highlights the difficulty for the government and the RBA in generating measures to support the economy when public spending is already the key driver of growth.”

“GDP growth, at +0.6% q/q and +1.7% y/y, looks to be broadly in line with what the RBA expected a month ago.”

“In the GDP report tomorrow, the focus will once again be on the household indicators – consumption and income. Soft retail sales volumes (-0.1% q/q) point to relatively modest growth in consumer spending.”

“Our view is that the GDP data will likely provide a bit more confirmation that the Bank will need to provide some extra stimulus to the economy next year in order to gradually push the unemployment rate down, generate better wages and household income growth and eventually lift inflation into the target band.”

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