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Analysts at Westpac suggest that the Australian economic conditions have surprised to the upside with June quarter national accounts (0.9% qtr, 3.4%yr) also including material upward revisions to history.

Key Quotes

“The economy has performed better than widely expected with global growth supportive as well as stronger commodity prices. The economy appears relatively well placed to respond to the challenges ahead although we still expect growth to moderate into 2019 with a less supportive international backdrop, rising trade tensions and China slowing. The cooling housing market (tighter financial conditions from macro and micro prudential measures as well as rising funding costs impacting many borrowers), at a time of high household debt and ongoing weak wages growth, will weigh on consumers.”

“With a recent change of Prime Minister, domestic politics may have an outsized impact. Several key State elections as well as the upcoming Federal election, due by May 2019, may see heightened uncertainty around public policy.”

“AUD/USD is trading around 18 month lows in low-mid 0.72s. The Aussie remains a risk-sensitive currency although near-term USChina trade risk premium is probably overdone.”