These growth figures are a body blow to Australia’s centre-right government, explains my colleague Amy Remeikis:
Scott Morrison has increasingly staked the Coalition’s election chances on the economy, warning repeatedly “the economy will be weaker under Labor”. This week the prime minister again sounded the alarm that voters could see a return to 1991 recession conditions under a Shorten government.
Morrison honed his message in a speech to the Australian Financial Review Business Summit on Tuesday, shaping the election as a contest between “enterprise and envy”.
But Australian Bureau of Statistics data released on Wednesday show the economy grew by 2.3% over the year, and just 0.2% for the December quarter, short of the Reserve Bank forecast of 0.6% and market expectations.
The Australian dollar has fallen faster than England wickets on a bad day at the Gabba, hitting a four-month low.
With growth so weak in the last quarter, traders are calculating that Australia’s central bank must be more cautious, and could even cut interest rates to help the economy.
Jasper Lawler of London Capital Group says:
The Aussie dollar dropped to a 4-month low of 0.7028. The Aussie dollar could see further downside.
Even though the Reserve Bank of Australia continue to put on a brave face, the economic backdrop remains uncertain and data is tilting to the weakside, boosting speculation of a rate cut from the central bank.
Australia’s growth figures are even worse if you adjust for population changes.
On a per-capita basis, Australia’s GDP has actually shrunk for the last six months, which puts the country into a ‘per capita recession’.
That’s because the population grew by 0.4% during the quarter, while GDP only rose by 0.2%.
That doesn’t mean that recent migration is bad for the economy, of course — quite the reverse if anything! But it may show that the underlying picture is weaker than the headline numbers show.
Australian slowdown is latest blow to global economy
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The global slowdown has claimed another victim. Australia – for so long one of the bright sparks in the world economy – has suffered a sharp slowdown.
Official figures show Australia’s economy only expanded by 0.2% in the final three months of 2018, much slower than the 0.6% which economists expected.
That follows lacklustre growth of 0.3% in July-September, meaning Australia’s economy weakened in the second half of last year.
Given Australia’s close links to China’s economy (through commodities trading) it’s a clear sign that the Chinese slowdown – and the trade war with the US – is sending dangerous ripples through the global economy.
And with China cutting its 2019 growth target yesterday, it’s becoming clear that the slowdown could last for a while.
Australian government spending and household consumption added some growth, while investment dropped.
On an annual basis, Australia’s economy only grew by 2.3% in the last quarter – the lowest since mid-2017.
Economists say the figures are a worry.
As Callam Pickering, economist at jobs site Indeed, put it:
“Good news was hard to find in the latest assessment of the Australian economy.
“Households are holding up okay despite lacklustre wage growth, although the key question is how long can that persist?”
Also coming up today
The OECD think tank issues its latest assessment of the world economy today, which may show the impact of trade war concerns and Brexit on growth.
We also get new US trade figures, plus the monthly ADP survey of private sector job creation, which will be closely scrutinised ahead of Friday’s Non-Farm Payroll report.
- 10am: OECD releases its interim economic outlook
- 1.15pm GMT: ADP report on US private sector employment in February
- 1.30pm GMT: US trade balance for December
- 3pm GMT: Bank of Canada interest rate decision