MNI DATA IMPACT: Australia Q4 GDP Beats, Data Predates Crisis

By Lachlan Colquhoun

     SYDNEY (MNI) - Australia's economy grew by 0.5% in the December quarter,

beating the consensus forecast that looked for GDP to grow 0.4%. However, the

data predated the start of the coronavirus that is seen as a threat to global

growth in coming months. 

     On an annualised basis, growth came in at 2.2% against 1.9% in Q3. Growth

in the third quarter was revised higher to 0.6% for Q3. 

     Other points of note in the Australian Bureau of Statistics release

include:

RBA rate cut context 

The Reserve Bank of Australia cut official rates yesterday down to a record low

0.5% citing the coronavirus emergency. The December growth data predates both

the bushfire crisis of January and now the global pandemic, both of which are

expected to impact on Q1 growth to the point that it could be a negative

quarter. If not for these crises the RBA would have been satisfied with today's

result, which would have played into its view that the economy had reached a

"gentle turning point" towards recovery.

Consumer revival 

     Household consumption added 0.2pps to the quarter's 0.5% growth, with

growth in spending on furnishings and household equipment up by 1.3%. This is

encouraging for the RBA, which has been looking for recovering house prices to

translate into higher consumer spending.

Private investment weak 

Gross fixed capital formation fell 1.0% and dragged the growth figure lower by

0.2pps. The construction sector continues to be weak both in terms of housing

and commercial construction.

Exports weaker 

Exports have been a major contributor to growth but only added 0.1pps in Q4.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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