Assessing Australia's March quarter economic growth

Company News

by Glenn Dyer

There’s every chance Australia’s March quarter economic growth went backwards after the final data drop on Tuesday, covering trade, government finance, wages, salaries, and inventories.

The Australian Bureau of Statistics releases the March quarter national accounts Wednesday at 11:30 a.m., and thanks to a very weak trade performance and a big revision in the December quarter trade data, the GDP growth figure might be lower than forecast or non-existent.

With a negative 0.4% contribution from retail trade offsetting a positive contribution from government financing activities of 0.2% and a rise in inventories after the fall in December, the GDP reading will be close to the line, given the large negative contribution from trade.

Perhaps the item that keeps GDP growth positive will be the 1% rise in investment, though that will be offset by a slump in the value of construction work in the quarter.

While inventories were up 1.3%, the 1.7% fall in the December quarter was revised to a smaller fall of 0.6%, which could be a positive for growth over the year given the sharp downward estimate for trade in that quarter.

The Australian Bureau of Statistics said that thanks to a sharp rise in imports and sluggish export prices, Australia's current account unexpectedly swung into deficit in the March quarter as imports surged and export prices fell.

The nation’s current account swung to a deficit of $4.9 billion in the first quarter, well under forecasts of a $5.1 billion surplus. The previous quarter's surplus was also revised down sharply to $2.7 billion, which suggests the 0.2% contribution from trade in the December quarter might be reduced. If there are no other revisions, then the overall 0.2% rise in GDP might be at risk.

The ABS said net exports would subtract 0.9 percentage points from gross domestic product (GDP) in the first quarter, when analysts had thought they would take 0.6 percentage points from growth.

Data from the Australian Bureau of Statistics on Tuesday showed the current account balance swung to a deficit of $4.9 billion ($3.27 billion) in the first quarter, well under forecasts of a $5.1 billion surplus. The previous quarter's surplus was also revised down sharply to $2.7 billion. Government spending on operational items rose 1.0% in the first quarter from the previous quarter to an inflation-adjusted $135.7 billion, the ABS reported.

Total investment in fixed assets by the government and public enterprises fell 0.9% to $33.1 billion. In all, the ABS estimated total public demand added 0.2 percentage points to the March-quarter gross domestic product (GDP).

The forecast from the market was for month-on-month growth of 0.2% - unchanged from December, and year-on-year growth slowing to a range of 1% to 1.35 from 1.5% through 2023.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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