AUSTRALIA DATA: Public Demand Keeps Growth Positive

Q2 GDP was close to expectations rising 0.2% q/q to be up 1% y/y, the slowest since the Covid-impacted Q3 2020 and excluding that period Q4 1991. As expected growth was driven by public demand and net exports, while private consumption, inventories and private capex were all drags. The headline result was in line with the RBA’s August forecasts and so we don’t expect its on hold stance to change at this point.

Australia GDP %

• Private consumption detracted 0.1pp from growth falling 0.2% q/q to be up only 0.5% y/y, lower than the RBA’s 1.1% forecast. The weakness was concentrated in discretionary spending, especially air travel, following a strong quarter in Q1. The household savings ratio was unchanged at 0.6%.
• Government spending rose 1.4% q/q to be up 4.7% y/y, the highest since Q2 2022, and contributed 0.3pp to growth. The strength was broad based across federal and state jurisdictions. This drove the 0.2% q/q rise in domestic demand, which slowed to 1.5% y/y from 2.4%.
• As expected, private capex was weak detracting 0.1pp from growth for the second consecutive quarter driven by non-dwelling construction and machinery & equipment. Private GFCF fell 0.6% q/q to only +1% y/y down from 2.5%, slightly below the RBA’s forecast. Inventories detracted 0.3pp concentrated in the industrial sector.
• While net exports contributed 0.2pp to growth, export growth was lacklustre rising only 0.5% q/q and 0.1% y/y, with the strength from education services, while imports fell 0.2% q/q but are still up 5.2% y/y.
• GDP per capita fell 0.4% q/q, sixth consecutive decline.

Australia domestic demand y/y%

Source: MNI - Market News/ABS