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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).”