Westpac Assess The Q2 GDP Print

In the wake of the weaker than expected Australian GDP print Westpac note that "the key surprise is around the labour market. Hours worked fell by -9.8% in the quarter, following a -0.9% in Q1 – the national accounts reported. That is materially weaker than the labour force survey, a -0.3% and a -8.4%. Output fell by less than hours worked – with labour intensive sectors most impacted by restrictions. Across the expenditure detail, the key surprise was that business investment was weaker than suggested by the partials, down by -3.5% vs our expected -1.3%. Infrastructure work rose, but by materially less than suggested by the partial. We were always surprised by the partials pointing to such a modest fall in overall business investment. Home building fell by 6.8%, weaker than the partial of -5.6%; real estate fell by -18.6%; public demand grew by 2.1%; inventories subtracted -0.6ppts and net exports added 1.0ppt. Another key feature of the accounts was around household incomes. Household incomes rose – despite the recession and the collapse in the labour market. This is because of the wage subsidy scheme and other income transfers from the government sector. Wage incomes fell by only -2.5%, while gross disposable income jumped by 2.2%, or up by a massive 2.9% in real terms. The household savings rate spiked to 19.8% from 6%, providing households with a considerable buffer to draw upon in coming quarters."