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3 Dec 2014
Soft Australian GDP highlights key weaknesses – RBS
FXStreet (Barcelona) - The RBS Research Team notes that the below than expected GDP growth in Australia highlights the key weaknesses in the Australian economy generated by the fall in commodity prices and retrenchment in mining investment.
Key Quote
“Australian GDP rose 0.3%q/q in Q3, much below 0.7% expected. Growth from a year earlier was 2.7%y/y, below 3.1% expected, and revised lower from 3.1% to 2.7%y/y in Q2, and appears now below trend.”
“Total capital expenditure fell 2.7%q/q and fell 2.8%y/y, accounting for the much weaker outcome. Consumption rose 0.6%q/q and rose 2.3%y/y, consistent with its recent trend somewhat below long run average levels.”
“Real net disposable income that takes account of the loss of income from weaker commodity prices fell 0.3%q/q and rose 0.8%y/y, well below the long run trend and a key part of the concern over the growth and government budget outlook. Real income has fallen for two quarters in a row making for headlines that there is a real income recession.”
“The data highlight the key weaknesses in the Australian economy generated by the fall in commodity prices and retrenchment in mining investment. March 3nth bill futures yields are up 6bp since the data and the AUD has taken a leg lower from .8450 to just below .8400. The market has moved to almost price in a full 25bp rate cut by Q4 next year.”
“AUD is trading more clearly off of commodity prices and rate spreads as the USD tends to strengthen broadly and search for yield takes a back seat. A further slide into low .80s looks more likely. Retail sales and trade data are due tomorrow.”
Key Quote
“Australian GDP rose 0.3%q/q in Q3, much below 0.7% expected. Growth from a year earlier was 2.7%y/y, below 3.1% expected, and revised lower from 3.1% to 2.7%y/y in Q2, and appears now below trend.”
“Total capital expenditure fell 2.7%q/q and fell 2.8%y/y, accounting for the much weaker outcome. Consumption rose 0.6%q/q and rose 2.3%y/y, consistent with its recent trend somewhat below long run average levels.”
“Real net disposable income that takes account of the loss of income from weaker commodity prices fell 0.3%q/q and rose 0.8%y/y, well below the long run trend and a key part of the concern over the growth and government budget outlook. Real income has fallen for two quarters in a row making for headlines that there is a real income recession.”
“The data highlight the key weaknesses in the Australian economy generated by the fall in commodity prices and retrenchment in mining investment. March 3nth bill futures yields are up 6bp since the data and the AUD has taken a leg lower from .8450 to just below .8400. The market has moved to almost price in a full 25bp rate cut by Q4 next year.”
“AUD is trading more clearly off of commodity prices and rate spreads as the USD tends to strengthen broadly and search for yield takes a back seat. A further slide into low .80s looks more likely. Retail sales and trade data are due tomorrow.”