Slow growth figures defy RBA
Weakening exports are compounding fears of a general economic slowdown in Australia as household budgets are stretched, and analysts warn the Reserve Bank will be forced to overhaul its overly optimistic growth forecasts.
House price falls are also appearing to frighten consumers into shutting their wallets ahead of the key Christmas trading period, with Australian Bureau of Statistics data yesterday showing a 0.4 per cent decline in retail sales in NSW, where house price falls have been most dramatic.
Nationally, retail rose 0.3 per cent in October, up from 0.1 per cent in September, which had to be downwardly revised.
Separate figures showed the nation’s exports increased far less than expected, although there was still a healthy $2.3 billion trade surplus in October.
It came as global ratings agency Fitch warned that the RBA would no longer lift official interest rates from record-low levels next year, revising down its forecasts for the recovery in the local economy.
Official data yesterday showed the Australian economy grew at its slowest pace in two years, sharply slower than expectations, following a large dip in mining investment that wasn’t offset by an expansion in non-mining industries, and amid weakness in the retail sector as stretched households reach their spending limit.
“We expect growth to face continued downside pressure over the coming quarters from slowing private fixed-capital formation growth due to a declining housing market and easing mining investment, and mining exports to face headwinds from slowing Chinese demand,” analysts at Fitch said.
Australia is enjoying a strong run of big trade surpluses, supported by high commodity prices, expanding exports of liquefied natural gas, and a lower Australian dollar. Gas exports are booming as vast new production facilities have been commissioned across the country’s north.
“Household spending isn’t falling off a cliff just yet but we still think that the downturn in the housing market will restrain consumption growth before long,” said Capital Economics’ Marcel Thieliant. “Households still seem to be coping reasonably well with sluggish income growth and falling housing wealth, but we think their resilience won’t last. And any slowdown in consumer spending may not be cushioned any longer by rising net exports.’’
JP Morgan economist Ben Jarman said the retail figures were consistent with a slowing sales environment.