Even the most pessimistic of forecasters didn’t expect the 0.3% growth rate Australia just printed in the third quarter.
It’s a terrible outcome given that net exports contributed 0.8% to growth. It shows that Australia is nowhere near making the economic transition needed.
GDP in current prices fell during the quarter. That’s the first such backwards step in seasonally adjusted dollar value of GDP since the June quarter of 2009. Not good in anyone’s books.
Likewise the trend in the seasonally adjusted growth rate has slowly declined recently with the 0.3% quarterly increase the worst outcome since the March quarter of 2013 – the joint worst outcome since the negative print of 0.4% in March 2011.
More bad news.
Then of course we have GDP per capita which has now fallen for two quarters in a row. Now we can really see the negatives stacking up in the economy.
Of course, this data is not the negative, but what it tells us about activity is.
You can add in the savings rate which was recently touted as the panacea for Australia’s domestic economic weakness by the RBA governor Glenn Stevens when he said:
“Given that household wealth has risen strongly over that period, and interest rates are low, a modest decline in the saving rate is perhaps not surprising and indeed we think it could decline a little further in the period ahead.”
It is sliding but in aggregate it’s not helping growth accelerate. Rather, it appears to be moderating weakness.
So the wash-up is that this is a set of weak data which suggests that the RBA has two options:
- Intervene in the Aussie dollar to drive it substantially lower, and thus spread the economic benefits across the economy, or
- Lower interest rates a touch in order to try to spur economic activity but also to lower the Aussie dollar.
The Aussie has acted as an economic stabiliser for most of the post-float era. The economy has probably never needed it to do its job more.