Australia’s amazing economy is at it again.
Fresh from a number of disappointing partial indicators, which saw many market pundits downgrade their expectations for today’s GDP release, the data surprised with a beat of 0.6% for the fourth quarter.
What was doubly surprising was that the ABS reported this 0.6% print was in large part driven by consumers.
“The major contribution to economic growth this quarter came from Household final consumption expenditure, which contributed 0.4 percentage points,” the ABS said.
That growth in turn was driven by “growth in the service industries of Information, media and telecommunications (2.7%), Retail trade (1.0%), and Arts and recreation services (2.2%),” the ABS says in the release accompanying the data.
That had ANZ chief economist Warren Hogan so ebullient that he tweeted success was close for Australia’s economic transition.
Our measure of non-mining economic activity is the strongest since the GFC indicating a successful post mining boom transition is underway
— Warren Hogan (@anz_warrenhogan) March 2, 2016
Given wage growth continues to be low there appears a clear decision by Australian households to save less and spend more. That is something the RBA suggested they would do last year.
Today’s data tells us three things:
- The Australian economy ended 2015 stronger than most observers thought;
- That strength was largely on the back of strong consumption from households who appear to have made the decision to spend some of the wealth they have gained in recent years; and
- The government’s current messy tax debate and its negative impact on consumer confidence are critical factors in growth in this quarter and next.
Just yesterday, the ANZ-Roy Morgan consumer confidence survey showed registered a significant deterioration in how Australians are thinking about the economic outlook. The market turmoil in early 2016 also mean consumers choose to save more and spend less in the current quarter, but ANZ also noted that the agonising and uncertainty in Canberra over the future of tax policy were probably helping to cloud the outlook.
But for now this data shows that for all the headwinds consumers faced at the end of 2015 they kept spending. Just as the RBA wanted.