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Analysts at NAB explain that the release of the Australia’s Q2 national accounts confirmed that the economy has grown at a strong pace over the last year, with notable growth in government infrastructure spending, and a surprisingly resilient household sector.

Key Quotes

“Exports have also risen as expected. Growth in the business sector has been a little more mixed, with weakness in the non-mining sector evident in Q2; investment in the mining sector rose in Q2. While the economy has grown more strongly than expected over the first half, the outlook is broadly unchanged from previous months.”

“In addition, downside risks have abated somewhat, with business conditions rebounding in August (though confidence weakened). Growth is expected to continue at above trend rates (at 3.3% in 2018 before slowing in 2019 and 2020).”

“Rising commodity exports, public infrastructure investment and a recovery in non-mining business investment are expected to drive growth. Our outlook for the consumer remains weaker, given the headwinds faced by the household sector.”

“The cooling in the housing market is also likely to see some weakness in dwelling investment over the next few years. While growth has been strong, inflationary pressure has remained weak, suggesting there is some time to go for the rise in output growth (and improving labour market) to feed through to inflation pressures more broadly – though recent data prints have showed some signs of a pick-up.”

“For now we have left our outlook for rates unchanged, but the risk remains that this could well be delayed.”

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