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Australia: Weakness likely to persist – Standard Chartered

Chidu Narayanan, economist at Standard Chartered, points out that Australia’s GDP growth slowed further in Q3 to 0.4% QoQ on slowing consumption and declining investment.

Key Quotes

“In y/y terms, growth picked up marginally to 1.7% from 1.6% but remains well below trend growth of c.3%. Government spending was the only source of strength in Q3; other components of growth (barring inventories) slowed from Q2.”

“We expect full-year 2019 growth to slow to a multi-decade low of 1.7%, picking up (due to a low-base) to a still-weak 2.2% in 2020.”

“We expect labour-market conditions to deteriorate sharply over the next few months as declining construction activity leads to significant job losses. The unemployment rate is likely to rise above 5.5%, weighing further on household consumption. Meanwhile, we see net exports subtracting from growth in the 2020 as they decline from a high base.”

“We expect two more 25bps rate cuts from the Reserve Bank of Australia (RBA), in February and Q2-2020, as growth slows further. We expect the central bank to embark on quantitative easing (QE) after hitting the cash rate floor of 0.25%; we expect this to come only at end-2020 or later.”

Author

Sandeep Kanihama

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

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