The latest report card on the health of the Australian economy will arrive later this morning with the release of Q4 GDP from the ABS.
After a shock contraction in the September quarter, the first since devastating floods struck southeast Queensland in the March quarter of 2011, economists expect growth to have rebounded smartly in the final three months of 2016, staving off a technical recession in the process.
Here’s the state of play:
- In the September quarter, GDP fell by 0.5% in seasonally adjusted chained volume terms, leaving the year-on year increase at 1.8%.
- It was the largest quarterly decline since Q4 2008, and the slowest year-on-year expansion since Q3 2009.
- As was the case when the economy last contracted in 2011, adverse weather conditions played a part in the ugly result with all states and territories apart from Western Australia and the Northern Territory recording their wettest or second-wettest May to September period on records, undoubtedly impacting economic activity.
- While real GDP — measured in volumes — contracted, nominal GDP, taking into account price movements during the quarter, fared better, registering an increase of 0.5%, thanks largely to booming commodity prices that saw Australia’s terms of trade lift 4.5%.
- Over the year, nominal GDP increased by 3.0%, close to double the pace of real GDP.
- Today, real GDP is expected to grow strongly, extending Australia’s run of uninterrupted economic growth to 25.5 years.
- The median economist forecast is centred upon a lift in real GDP of 0.8%, leaving year-on-year growth at 2.0%.
- If correct, that would be exactly in line with updated forecasts offered by the RBA in its Statement on Monetary Policy released earlier this month.
- From an expenditure approach, growth is likely to be supported by a modest lift in household consumption, dwelling investment, government expenditure and net exports, offsetting expected drags from business investment and private non-farm inventories.
- Adding some intrigue to the real GDP figure, household spending on services — the largest component in household consumption which is the largest part of the Australian economy — won’t be known until the GDP report is released.
- We already know that retail sales volumes — accounting for around 30% of household consumption — grew by a solid 0.9% in the quarter.
- Growth in household consumption has been slowing recently, so there will be plenty of attention on this figure, particularly the interrelationship with the household savings ratio given soft wage and incomes growth last year.
- Reflective of continued gains in Australia’s key commodity export prices, helping to boost Australia’s terms of trade by a whopping 9.1% in the quarter, nominal GDP is also expected to expand strongly.
- According to the CBA, it’s likely to grow by around 3% for the quarter, the fastest increase in five years. That would leave the year-on-year rate at 5.8%, excluding any revisions to the existing data.
The report will arrive at 11.30am AEDT.
Business Insider will have full coverage as soon as data hits the screens.