Macquarie expects another 'solid' increase in Australian GDP next week

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  • Australian GDP grew by 1% in the March quarter of this year, the largest increase since late 2011.
  • Macquarie Bank expects another “solid” result in Q2, forecasting an increase of 0.8% to 0.9%.
  • It says household spending is likely to drive the increase, rebounding after a weak result in Q1.

Australia’s economy grew by 1% in early 2018, propelled higher by a strong lift in exports and business inventories.

The result left year-ended growth at 3.1%, the fastest increase in nearly two years and above the level where unemployment and inflation are generally seen as stable.

Macquarie Bank expects those trends to have continued in the June quarter, predicting a “solid” increase in real GDP of between 0.8% to 0.9%.

Macquarie Bank

However, rather than being driven by trade and a build in inventories, Macquarie says it’s the consumer, the largest part of the economy, that likely drove growth during the quarter.

“We have pencilled in a solid 0.8% rise for Q2 household consumption, leaving year-ended growth at 2.75%,” says Justin Fabo and Ric Deverell, Economists at Macquarie.

“Retail trade volumes rose a strong 1.2% in Q2. Both retail trade and aggregate consumption growth have followed a see-saw pattern over the past two years.”

At around 60% of GDP, such an increase in household consumption would add around 0.5 percentage points to quarterly growth.

Macquarie also expects trade to yet again boost growth, forecasting an increase of around 0.2 percentage points for the quarter.

“Export volumes appear to have risen modestly in the quarter while import volumes look to have fallen a little,” Fabo and Deverell say.

Macquarie also expects dwelling and business investment, as well as government spending, to add moderately to growth, helping to offset an expected decline in private inventories after increasing in the prior two quarters.

Macquarie says its GDP estimate will be firmed up in coming days as partial data roll in.

That process will begin today with the release of June quarter capital expenditure figures, capturing around 60% of total business investment.

That will be followed early next week by business indicators, net exports and government expenditure and investment for the quarter.

Australia’s Q2 GDP report will be released on Wednesday, September 5.

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