Q2 GDP Expected To Print Higher Than Q1 On Wednesday

The RBA reiterated in its September meeting statement that the “Australian economy is experiencing a period of below-trend growth and this is expected to continue”. Q2 GDP is released on Wednesday and consensus has been revised up 0.1pp to +0.4% q/q following the higher-than-expected net exports and public demand contributions published today. If this forecast is realised it would be stronger than Q1’s 0.2% q/q and result in annual growth of 1.8% down from 2.3% in Q1.

• Projections are in a broad range from flat to +0.8% q/q with most analysts between +0.2% and +0.5%. ANZ and Westpac are both forecasting +0.4% q/q and CBA & NAB +0.5% q/q. Macquarie Bank is an outlier expecting +0.8% q/q, which would be the strongest quarterly growth since Q2 2022.
• In terms of the Q2 data released so far, retail sales volumes fell 0.5% q/q, construction volumes rose 0.4% (Q1 was revised up sharply), machinery & equipment capex volumes +1.9% , inventory volumes fell 1.9% q/q, net export contribution to GDP +0.8pp and public demand +0.5pp.
• Productivity/unit labour cost data are also released with the national accounts tomorrow and given Australia’s very poor productivity performance and the RBA’s attention on this area, it is likely to be monitored closely. Given productivity fell 3% q/q in Q2 2022, base effects should mean that the 4.5% y/y drop in Q1 2023 should be the trough.