Australia’s Economic Pulse Revealed
Australia’s economic growth is expected to continue its gradual recovery, with the national accounts figures set to be released this week. The economy is forecast to have grown 0.6 per cent in the three months to June, which would lift the annual rate from 1.3 per cent to 1.7 per cent.
Economic Growth Forecast
According to AMP deputy chief economist Diana Mousina, the Australian Bureau of Statistics (ABS) release on Wednesday is expected to show a 0.6 per cent growth in the economy for the three months to June. However, she notes that harder-to-forecast business inventories and public spending data, due Monday and Tuesday, still pose a risk to her forecast. Public spending has been slowing in recent months as some large-scale infrastructure projects have wound down, and an uptick in private demand has failed to pick up the slack.
Private Sector Weakness
Ms Mousina believes that the private sector is still incredibly weak, which could lead to GDP numbers staying pretty weak. "I think the private sector is still incredibly weak," she said. "It is a bit of a risk that the GDP numbers stay pretty weak. We could see them running at a lower level than the RBA is expecting for a while." The Reserve Bank of Australia (RBA) estimated the economy would grow 1.6 per cent over the year to June earlier this month.
Economic Growth Expectations
NAB economists expect GDP growth to undershoot the RBA’s prediction at 1.4 per cent, although CBA, ANZ, and the market anticipate annual growth of 1.7 or 1.8 per cent. Despite the uncertainty, borrowers shouldn’t think another rate cut imminent, following last week’s shock jump in monthly inflation, Ms Mousina said.
Productivity Concerns
The RBA has been concerned that lagging productivity could flow through to higher labour costs and inflation. However, Westpac senior economist Pat Bustamante noted that "the fall in aggregate productivity has been skewed by the expansion of the non-market sector, which has a significantly lower level of ‘measured’ productivity". This is something which has also declined in the resources sector, with miners running down capital stock and increasingly exploiting lower-grade projects due to booming commodity prices.
Upcoming Events
Investors won’t have to wait long to hear from the RBA, with governor Michele Bullock set to deliver an address in Perth on Wednesday evening. On Thursday, deputy governor Andrew Hauser will also be closely watched in an interview with Reuters. The same day, the ABS will release its household spending indicator for the first time since it ceased its long-running but less comprehensive retail trade series.
Housing Data
Housing data will also take prominence this week, with Monday seeing Cotality update its Home Value Index for August and the ABS release building approval figures for July. Wall Street investors are meanwhile mulling inflation data showing US tariffs have started feeding into prices.
Market Update
The S&P 500 declined 0.64 per cent to end Friday at 6,460.26 points, a day after notching a record-high close, while the Nasdaq declined 1.15 per cent to 21,455.55 points and the Dow shed 0.20 per cent to 45,544.88 points. US indices will be closed Monday for Labour Day. Australian share futures climbed 25 points, or 0.28 per cent, to 7,922.
Conclusion
In conclusion, Australia’s economic growth is expected to continue its gradual recovery, with the national accounts figures set to be released this week. While there are concerns about the private sector’s weakness and productivity, the RBA is expected to keep a close eye on the economy. Investors will be watching closely as the RBA governor and deputy governor deliver addresses and the ABS releases new data. As the economy continues to grow, it will be important to monitor the impact of public spending, private demand, and productivity on the overall economic pulse.
