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Westpac analysts note that the Australia’s national output grew by 0.5% in the June quarter, meeting our expectations.

Key Quotes

“Annual growth slowed to 1.4%, a sharp loss of momentum from 3.1% a year ago. This pace is below that of population growth, 1.6%, and is the slowest pace since the GFC, September 2009.”

“The economy lost considerable momentum from mid-2018, led by the turning down of the housing sector (after peaking in mid-2018) and by a consumer slowdown.”

“Both GDP and consumer spending contracted over the year in per capita terms.”

“The Australian economy is navigating a period of cyclical weakness, centred on construction, particularly housing after a tightening of lending standards and falling prices. Weak wages growth and low productivity are constraining consumer spending. The further fall in the savings rate to 2.3% highlights the risk to spending posed by the eventual need of households to rebuild savings.”

“Looking ahead, recent policy stimulus (tax cuts and interest rate cuts) will provide a boost to activity – but given the weak starting point and ongoing powerful headwinds growth is likely to remain below trend over the remainder of 2019 and through 2020.”

“Westpac still sees the best timing for this rate cut at the next Board meeting in October, particularly taking the lead from an expected cut from the US Federal Reserve on September 18.”