Australia’s GDP growth today was solid at 0.9% for the first quarter of 2015.
UBS economists Scott Haslam and George Tharenou summed up the data saying the print was “well above expectations, led by consumers, exports & stocks” and “about twice
its 0.5% ave. over the past few quarters.”
The bad news is the rate for year-on-year growth has fallen, from a downwardly revised 2.9% a year ago to 2.3% in the year to March 2015.
Recapping on the break-up of the data, Haslam and Tharenou said:
Private demand was helped by both a solid consumer (0.5% q/q & +0.3%pts to GDP) & strong dwellings (4.7%, & +0.2%pts), but offset entirely by weak capex (-3.6%, & -0.5%pts), staying around 1.2% y/y (against a 3.2% decade ave.). With public flat, total demand in the economy was also flat (& a weak below trend +0.8% y/y). With no q/q domestic growth, the 0.9% GDP print mostly reflected the 0.5%pts from net exports (as ongoing strong exports of 8.1% y/y out-paced a pick-up in imports to 3.3%
y/y), and 0.5%pts from non-farm inventories (albeit a reflection of strong retail activity). By sector, domestic growth is strongest in IT, accommodation & food, finance & farm.
Here’s how it looks in graphical form. Year-on-year on the left and the first quarter of 2015 on the right.
You can see in the charts that the fruits of the mining boom as it enters the production phase and a lower Aussie dollar have helped net exports, while lower interest rates are working to drive dwelling investments and private consumption higher.
That’s not to say the economy is on the road to rude health. As the NAB economics team said in a note to clients “it’s a challenging transition.”
The RBA is still doing it darnedest to get business investment to turn positive in the face of the collapse of the mining investment boom.
But Haslem and Tharenou believe this lift in investment will come through. “Overall though, we retain our view that some lift in non-mining capex overtime, as the AUD falls, means growth is unlikely to be ‘bad enough’ to see the RBA cut again.”
Low rates look like they are working – just slowly.