etvfutures.com
etvfutures.com December 16, 2017


Economic growth slower than expected

06 December 2017, 10:37 | Cesar Cruz

The RBA has kept the cash rate at a record low 1.5 per cent ahead of the crucial Christmas period

The RBA has kept the cash rate at a record low 1.5 per cent ahead of the crucial Christmas period

But Australian Bureau of Statistics data showed Australia's economy expanded 0.6 per cent in the September quarter and grew 2.8 per cent over the year.

Treasurer Scott Morrison used the opportunity to passionately call on the public to support the government's proposed income tax cuts in order to stimulate more growth in the economy.

On a quarterly basis, the economy actually slowed overall from revised growth of 0.9% in April-June.

Indeed, household consumption rose just 0.1 percent in the quarter, the smallest increase since late 2012.

"Today's print is not a good number", a JP Morgan economist, Sally Auld, said.

The growth is worse than market expectations for the economy to grow by 0.7 per cent in the quarter and 3.0 per cent over the 12 months to September 2017.

It was helped by the -0.3% figure for the September quarter 2016 falling out of the calculation (a figure affected by the drop in economic activity before the July 2016 election).

The Australian dollar slid about a quarter of a US cent as market participants essentially lowered their expectations that Australia's central bank-already in a lengthy holding pattern-will take action on interest rates anytime soon.

The household savings ratio also ticked up 0.2 per cent to 3.2 per cent, suggesting that households have been reluctant to run down savings to fund consumption.

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The biggest fall in the September quarter was in agriculture, forestry and fishing, which declined by 4.1 per cent.

However economists warn the lopsided nature of expansion could be a risk to growth in coming quarters and force the central bank to delay any move on interest rates.

Household consumption accounts for 55 percent of Australia's A$1.7 trillion economy.

"Consumers are indeed feeling the strain", Mr Bowen said.

But a cloud still hangs over the Australian consumer, with record household debt, years of record-low wages growth, and, more recently, softening house prices.

The NAB's chief economist, Alan Oster, said the household sector dynamics were a concern.

About 17 out of 20 industries recorded growth during the quarter, underlining the improvement in business conditions and corporate earnings over the previous year.

Morrison said the important thing to focus on was private investment, because its contribution to growth more than tripled in the quarter.

This was the result of stronger business investment and construction, especially engineering construction.



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