Australia: Annual GDP growth at its lowest since the GFC – ANZ

Felicity Emmett, senior economist at ANZ, notes that the Australian economy grew just 0.5% q/q in Q2, while annual growth continued to slow and is now down to 1.4%, its slowest pace since 2009 in the midst of the global financial crisis (GFC).

Key Quotes

“Another soft outcome for GDP in Q2 caps off a very weak year of growth. The slowdown in the economy has been remarkable: this time last year the economy was growing well above trend at 3.3%, now annual growth has more than halved to 1.4%.”

“The result will be a disappointment for the RBA, which had forecast 1.7% y/y for the quarter just a month ago, and suggests that another round of growth downgrades is likely in the Bank’s November Statement on Monetary Policy.”

“The report shows that weakness in the economy has become more broad-based, with the supports to growth more narrow. The public sector continues to be the key driver of growth, adding 0.4ppt to q/q GDP growth and a massive 1.3ppt to 1.4ppt of annual GDP growth.”

“Overall private sector demand was flat in the quarter, with both housing construction (−4.4% q/q) and business investment (−0.4%) falling. The household sector as well remains under pressure, with weak income growth and the earlier fall in house prices weighing on consumer spending (+0.4% q/q).”