Aus­tralia econ­omy in a rare con­trac­tion; spend­ing falls Econ­omy shrinks 0.5% in Q3

Kuwait Times - - BUSINESS -

SYD­NEY: Aus­tralia’s econ­omy con­tracted for just the fourth quar­ter in 25 years, of­fi­cial data showed yes­ter­day, slow­ing the an­nual growth rate to 1.8 per­cent amid weaker gov­ern­ment and con­sumer spend­ing on top of softer trade fig­ures. The Aus­tralian Bureau of Sta­tis­tics re­ported a 0.5 per­cent con­trac­tion for the Septem­ber quar­ter. It was the weak­est fig­ure in eight years-de­spite the re­cent up­swing in com­mod­ity prices-and un­der­lined the chal­lenges fac­ing a coun­try in transition from a min­ing in­vest­ment boom.

“The con­trac­tion in real GDP (gross do­mes­tic prod­uct) recorded in the Septem­ber quar­ter is not just a re­minder, not just a wake-up call or a warn­ing about be­ing com­pla­cent when it comes to eco­nomic growth,” Trea­surer Scott Mor­ri­son told re­porters in Can­berra. “It is a de­mand to sup­port eco­nomic poli­cies that drive the in­vest­ment needed... to sur­vive in a tough and com­pet­i­tive en­vi­ron­ment.” The lat­est fig­ures-at the lower end of fore­casts-came af­ter a stel­lar sec­ond-quar­ter re­port that saw the econ­omy ex­pand by a re­vised 0.6 per­cent for 3.1 per­cent year-on-year, to mark a quar­ter of a cen­tury that Aus­tralia has avoided re­ces­sion.

The Aus­tralian dol­lar fell about half a US cent to 74.25 cents. “It was even weaker-than-ex­pected, and con­sumer (spend­ing) was a big dis­ap­point­ment,” JP Mor­gan econ­o­mist Ben Jar­man said. “We are of the view that the RBA (Re­serve Bank of Aus­tralia) is go­ing to have to ease to keep growth at a sat­is­fac­tory level.” Gov­ern­ment in­vest­ment fell by 0.2 per­cent for July-Septem­ber, while house­hold spend­ing grew by a slow 0.4 per­cent. Net ex­ports de­tracted 0.2 per­cent­age points from growth. The cen­tral bank on Tues­day held in­ter­est rates at a record-low 1.50 per­cent, with gov­er­nor Philip Lowe not­ing “some slow­ing in the year-ended growth rate is likely, be­fore it picks up again”.

The Aus­tralian econ­omy has charted a bumpy path since the end of the min­ing in­vest­ment boom, with the data show­ing that re­sources spend­ing was con­tin­u­ing to fall while busi­ness in­vest­ment was weak. The RBA has eased rates by 300 ba­sis points since Novem­ber 2011 - in­clud­ing two cuts this year-to sup­port growth in non-re­sources in­dus­tries. The fo­cus now shifts to the Oc­to­ber-De­cem­ber fig­ures. Two con­sec­u­tive quar­ters of neg­a­tive growth would meet the tech­ni­cal pa­ram­e­ters for a re­ces­sion, but an­a­lysts say the lat­est dis­ap­point­ing data is more likely to be a one-off than a sign of sus­tained weak­ness. Con­struc­tion and gov­ern­ment spend­ing look set to im­prove for the next quar­ter, while re­bound­ing com­mod­ity prices should feed through to bet­ter ex­port num­bers, West­pac se­nior cur­rency strate­gist Sean Cal­low said. Aus­tralians’ will­ing­ness to spend has been damp­ened by slow wage growth while the third-quar­ter pe­riod also co­in­cided with the fiercely fought fed­eral elec­tion and a pro­tracted vote count that may have left con­sumers un­will­ingly to loosen the purse strings, he added. “Al­most ev­ery­thing that could have gone wrong has gone wrong in the same quar­ter, which at least raises the hope that there’s a sharp re­bound in Q4,” Cal­low said. AMP Cap­i­tal chief econ­o­mist Shane Oliver ex­pected Aus­tralia to avoid a re­ces­sion, al­though growth was “still likely to be frag­ile and con­strained”. In­fla­tion also re­mains well off the RBA’s tar­get range of 2.0-3.0 per­cent, giv­ing the cen­tral bank scope to ease fur­ther. De­spite the neg­a­tive quar­ter, Aus­tralia’s econ­omy was still pow­er­ing for­ward in com­par­i­son to de­vel­oped world peers, Mor­ri­son said. “Our an­nual real growth is still higher than six out of the world’s G7 economies, sec­ond only to the United King­dom. Higher than the US, Canada, Ja­pan, Ger­many, and higher than the OECD av­er­age,” he said.


SYD­NEY: Con­struc­tion per­son­nel work on a build­ing site in cen­tral Syd­ney yes­ter­day. Aus­tralia’s econ­omy con­tracted for just the fourth quar­ter in 25 years, of­fi­cial data showed, slow­ing the an­nual growth rate to 1.8 per­cent amid weaker gov­ern­ment and con­sumer spend­ing on top of softer trade fig­ures.


NEW DELHI: In­dian la­bor­ers walk past an ele­phant and oth­ers work­ing in a field on a cold foggy morn­ing in New Delhi yes­ter­day.

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