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Westpac analysts are retaining their 0.5% GDP forecast of Australian economy for Q2 and suggest that around 0.4ppts of  this gain is likely to come from net exports, with growth in domestic demand negligible.

Key Quotes

“We think Q2 GDP is unlikely to impact near-term decision making, with the real question around whether a stabilising housing market and new stimulus shore up the economy in the second half of 2019. This information is unlikely to be sufficiently clear by November – when the RBA next update their forecasts – but in any case, the RBA’s August forecasts already suggest more policy easing is required.”

“As such, we continue to expect that the RBA will cut in October, and given we expect economic conditions to remain subdued, deliver a follow-up cut in February to a cash rate of 0.50%.   A move in October has some advantages, namely reducing the risk of having to cut in back-to-back months later on and consequently damage consumer sentiment – as we saw with the June/July cuts.”