Economic growth record
sits at 1.7 per cent, down from 2.4 per cent at the end of last year. It’s also well shy of the 3 per cent level commonly associated with an economy churning out jobs and generating wage and price inflation.
The result was largely in line with most economists’ expectations. However, some had warned of a potential slide into contraction after Tuesday’s current account figures laid bare the impact of Cyclone Debbie on coal exports and heavy east coast rains on dwelling construction.
Consumers did their bit during the quarter, contributing 0.3 percentage points to the final tally as electricity bills and vehicle running costs mounted.
But Australia looks far from the picture of health that almost 26 years of recession-free growth ought to portray, with wage growth stubbornly weak and businesses yet to commit to major spending plans.
It means this month’s likely record-breaking feat in surpassing the Netherlands, which chalked up 103 consecutive quarters of growth from 1982 to the global financial crisis, appears set to be greeted with indifference.
At any rate, the OECD attests the growth stretch in the Netherlands only ran for 22 years, with Japan the true record-holder, boasting a 33year post-war streak that began in March 1960.
Markets took heart at yesterday’s positive figure, however, with the Australian dollar rocketing nearly half a US cent on the news. It touched US75.44¢ shortly after noon, its highest point since April 24.
Contango Asset Management chief investment officer George Boubouras said the economy felt resilient but the perception was that people wanted more to show for it in their own lives.
“It’s a base effect, once you achieve that sort of stature everyone expects it to be even better,” Mr Boubouras said.
CommSec chief economist Craig James said workers were becoming more productive, which was positive for the economy in the longer term.
“If you have faster economic growth, you want that underpinned by productivity. And it is. You also want inflation restrained together with labour costs – a further two ticks,” Mr James said.
Treasurer Scott Morrison warned the Cyclone Debbie effect was likely to extend into the current quarter, with coal export volumes set to suffer, but annual growth was nonetheless in line with his Budget forecast of 1.75 per cent for the financial year.
“This is a very resilient economy. Despite the headwinds, despite the challenges, the Australian economy has continued to be quite robust,” Mr Morrison said.