Overview
The Australian National Accounts, to be released on Wednesday March 1, will provide an estimate of economic activity for the December quarter.
In the September quarter, the Australian economy stumbled, contracting by 0.5%. Annual real GDP growth slowed from an above trend 3.1% to 1.8%. Key negatives were: uncertainty around the July Federal election; the impact of tighter lending conditions 2015H2; sluggish employment after a hiring burst / overshoot in 2015; and consumer caution.
In Q4, the economy rebounded, although not sharply in our view, as suggested by a still sluggish labour market. The arithmetic of our Q4 GDP forecast of 0.4% is: domestic demand 0.6%; net exports +0.1ppts; and inventories -0.3ppts. Annual GDP growth edges lower to 1.6%.
Labour market conditions were relatively subdued in the December quarter. Employment was flat, with a fall in full-time offset by a rise in part-time. Against that, hours worked rose, up 0.5%.
Underlying wages growth is sluggish, although the national accounts measure has shown a little more strength of late. Also of note, when considering real household incomes, consumer prices increased by 0.5% in the quarter, which is a little stronger than the outcomes recorded this time a year ago.
Domestic demand in the December quarter rebounded by 0.6%, reversing a 0.5% contraction in Q3. In summary: consumer spending strengthened, particularly retail sales; home building activity bounced back from weather disruption; business investment appears to have stabilised, after 12 consecutive declines. Net exports also improved, from a surprise subtraction of 0.2ppts to a small positive of 0.1ppts. Export volumes resumed their upward trend after supply disruptions.
Reference: WestPac Banking Corporation
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