Data is here, from earlier:
Q3 GDP from Australia: +0.3% q/q (vs. expected +0.7%)
Comments from around the traps …
National Australia Bank senior economist David de Garis:
- Said a weaker local currency was needed to help the economy
- ‘‘The currency is moving in the right direction and the economy needs it to keep moving’’
- ‘‘Certainly if the dollar is coming off that will at least help support the confidence of domestic businesses’’
- Said the RBA has room to cut the cash rate to boost the economy, if needed. ‘‘They’ll review it in the new year”
Westpac Banking Corp. Chief Economist Bill Evans
- “We were expecting soft numbers, but not that soft”
- “There was a substantial fall in government expenditure and mining investment. They’ve been the two biggest headwinds for the economy in recent times and this quarter really highlights that”
- “The market has reacted quite swiftly to” today’s numbers
- “The balance of risks on today’s news increases the probability of a cut.”
- Evans is maintaining a forecast for a rate rise in August on a strengthening global economy
ANZ chief economist Felicity Emmett:
- Slowing growth a “disappointing result”
- When measured in income terms, nominal GDP contracted 0.1 per cent in the quarter
- “Soft income growth will weigh on profits, wages and public revenues, and flow through to softer consumer spending, business investment and public demand”
- The data reveale that non-resources industries had been slow to pick up the slack left by the end of the mining infrastructure boom
- “Moreover, the drag from the wind-back in mining investment still has a long way to run and is likely to be much sharper over coming quarters as large-scale LNG projects approach completion”
Michael Workman, a senior economist at Commonwealth Bank:
- “It’s a very disappointing result”
- “Nominal GDP contracted as falling resource prices hit incomes, and those prices dropped a lot more this quarter, so there’s more pain to come”
- “This will encourage the market to fully price in another cut in interest rates, though it’s not clear whether 25 basis points would really make that much difference”
JP Morgan economist Ben Jarman:
- Main surprise was in business investment … the drag was much larger than expected
- “The risk of large single-quarter capex unwinds is one that has loomed since the terms of trade peaked, and probably will linger for several years. Even under the assumption that the trend decline in mining capex accelerates next year, the magnitude of the drag today suggests reasonable chance of a rebound in GDP growth in 4Q. Still, the sticker shock of an outcome so clearly adrift of trend growth, after a year of no policy support, will ramp up the RBA’s anxiety that other pockets of domestic demand are not yet firing and that the return to trend growth is getting off track”
TD Securities head of Asia-Pacific research Annette Beacher:
- Historical GDP reports usually have little monetary policy implications
- But “with more analysts and the financial markets demanding more rate cuts from the RBA as national incomes slide, this weak report has more than the usual significance.”
- “We will be watching our signposts very closely to see whether the next move is up or down for the RBA cash rate”
Matthew Peter, the Brisbane-based chief economist at QIC Ltd (which has more than A$70 billion ($59 billion) under management):
- “It must bring the potential of a rate cut back into the thinking” of the RBA
- “The fall in the exchange rate will help the non-mining sectors of the economy but we’re going to have to wait for that to filter through”
Matthew Circosta, economist at Moody‘s Analytics:
- “It’s a disappointing performance and there are a lot of challenges facing the domestic economy.
- The real rate of GDP growth is slowly, and you’ve also got the nominal measures of GDP growth slowing as well with the terms of trade down, corporate profits weakening and household incomes sluggish”
- “I think the bias is towards easing. We’re neither on the rate hike or the rate cut side”
- “A lot of stimulus is being instituted in Asia: we’ve seen China cut rates, the bazooka in Japan … rate cuts in Korea as well. So that’s helping the Asian outlook. I don’t think the RBA will cut rates unless we start to see the slowdown getting more excessive. House prices are relatively strong and they don’t want to fuel that debt fire as well”