Overly optimistic reactions to discouraging GDP data

The RBA and the Government must be happy the media is accepting the Bank’s “gentle turning point” view of the Australian economy (e.g. see the AFR’s ‘Back on track’: GDP lifts to 1.7pc), but I can’t see how the September Quarter National Accounts published by the ABS today support it. In September quarter, the Australian economy grew 0.4%, compared with 0.6% in June quarter, so the period of relatively weak growth in the economy is continuing.

Sure, the through-the-year growth rate has improved slightly from 1.6% to 1.7% but, as Pete Wargent suggested last week, that’s occurred because a past poor quarterly result has now dropped out of the calculation (see his CapEx outlook fizzles). The new quarterly data instead support the view that the economy is continuing to slow down.

In Queensland, domestic sources* added very little to the growth of the state economy, and State Final Demand grew only 0.1% in September quarter (see chart below). NSW’s and Victoria’s levels of State Final Demand grew at an unimpressive 0.3% and 0.4% respectively, while WA’s fell by 0.2%. Queensland’s and WA’s GSP growth rates should look better once exports are accounted for, but there is no denying these are discouraging figures.

SFD_quarterly_upscaled_image_x4

* i.e. household consumption, dwelling investment, government spending, business investment, but excluding (net) exports which aren’t available on a comparable state-by-state basis.

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2 Responses to Overly optimistic reactions to discouraging GDP data

  1. I remember coming across that phrase ‘gentle turning point’ in yesterday’s RBA release thinking was a deliciously revealing phrase. Either it is or it isn’t and I expect it would be hard even for those in the Bank who are running their ‘steady as she goes’ strategy to know whether the strategy and the rhetoric come after or before their interpretation of the data and their setting of strategy.

    And what a great idea to decide on the setting for the next two months the day BEFORE the numbers come out.

    • Gene Tunny says:

      Yes, I agree they should change the meeting date. I suppose they’re worried they’ll get asked why they hadn’t changed it earlier given it’s been obvious for a long time they should change it. We may need to wait until we have a new governor for them to find a convenient excuse for changing it.

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