Australia GDP soars, but growth remains patchy

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Australia’s March quarter GDP report has just been released, and it’s come in well above expectations.

Over the quarter the economy grew by 0.9%, leaving the annual rate of growth at 2.3%. Analysts had been expecting a quarterly increase of 0.7% with annual growth of 2.0%.

Here’s a table showing the key figures from the report.

While the headline figure topped expectations, the internals of the report were less convincing with the quarterly increase driven by a jump in inventories (+0.3ppts) and growth in export volumes (+0.5ppts). Surprisingly, final consumption expenditure, the biggest contributor to Australian economic growth, added just 0.4ppts to quarterly growth. Elsewhere general government expenditure added 0.1ppts while private fixed capital formation detracted 0.3ppts with weakness in non-dwelling construction, along machinery and equipment expenditure, overshadowing a 0.2ppts boost from private dwellings.

Although a reasonable quarterly result, ANZ economist Felicity Emmett believes the outlook for growth remains clouded.

“The outlook for business investment, both mining and non-mining remains weak. The drag from the wind back in mining investment still has a long way to run and is likely to be much sharper over coming quarters as large-scale LNG projects approach completion. Added to this is the recent weakness in non-mining investment intentions. And with growth in household consumption remaining soft, it’s difficult to see what will drive businesses to lift investment. While lower interest rates are helping with this transition at the margin, the missing ingredient seems to be confidence, both at the consumer and business level”.

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