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Felicity Emmett, analyst at ANZ, notes that 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.  

Key Quotes

“The detail of the report shows that the public sector is punching above its weight, contributing 1.3ppt to the 1.4% growth over the past year. Private sector demand was flat in the quarter and down 0.4% over the past year.”

Q2 is likely to be the low point in the cycle, with stimulus in the form of tax cuts and rate cuts helping to support stronger outcomes in H2. The reality is, however, that the underlying momentum in the economy remains very soft, and  further support from monetary policy is likely to be required in time.”

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.”

Ultimately, the Q2 GDP data confirm that the economy needs more stimulus to generate stronger growth, lower unemployment and inflation consistent with the RBA’s 2-3% target band.”