ONLY weeks after signing up to an ambitious growth target in Brisbane, the government’s economic credentials have taken another beating as the country’s economic growth rate slumps to less than half what was expected.
Australia’s economy grew by 0.3 per cent in the September quarter and by 2.7 per cent in the 12 months to September, official figures show.
Gross domestic product (GDP) growth was expected to rise by 0.7 per cent in the quarter for an annual rate of 3.1 per cent, according to AAP’s survey of 15 economists.
The Australian dollar slumped on the news, dipping below US84c to a four-year low on the weaker-than-expected result.
The local currency hit US83.97c, its lowest level since July 2010, after the figures were released at 11:30am (AEDT), down from US84.62c just before the data.
News of a dramatic slowdown in growth will put pressure on the government to dump its controversial spending cuts, and raise the possibility for further official cuts in interest rates in the new year.
Australia’s economic growth rate has to 2.7 per cent over the year to September, but real net national disposable income finished the 12-month period only 0.8 per cent higher.
Mining, financial services and IT made the biggest contributions to growth of the quarter, while public administration and construction shrank, which will surprise economists given the jump in home building.
A drop in non-residential construction was the main driver behind the weaker-than-expected figures, JP Morgan economist Tom Kennedy said.
“Non-dwelling construction took off 0.6 per cent and that was clearly the biggest drag and that was a bit of a surprise to us,” he said.
“Private capital expenditure is the key drag here and is the big reason why we got the downside surprise.
“Non-mining is picking up in a broad sense but it hasn’t really picked up sufficiently, it seems, to really offset the weakness in the resources sector.”
But Commsec chief economist Craig James said economic growth was moving towards the RBA’s expected forecasts for the December quarter.
“On the basis of current forecasts, the Reserve Bank had expected annual growth to slow to 2.5 per cent in the December quarter,” he said.
“In short, the economy is evolving as expected, so the Reserve Bank is unlikely to be tempted to cut rates again.
“We think that the next move in rates will be up, but not until August 2015 at the earliest.”
Mr James expects the economy to grow at around 3 per cent over the 2014/15 financial year, then accelerate in the first half of the following year.
“While some analysts are tipping another rate cut, that could actually be counteractive – creating greater angst about the future amongst consumers and businesses,” he said
Exports of goods and services grew 0.6 per cent over the three months, one of the biggest contributions to economic growth, but the Australia’s terms of trade fell 3.5 per cent over the same period foreshadowing weaker contributions from the sector in the future.
Household spending rose 0.5 per cent in the September quarter and was up 2.5 per cent over the year to September, seasonally adjusted.
Total investment in housing fell 0.9 per cent in the quarter to be up 6.8 per cent in the year to September.
Total gross fixed capital formation — investment by households, businesses and government — fell 2.7 per cent in the quarter and was down 2.8 per cent over the year.
Domestic final demand, a measure of total spending in the economy, fell 0.3 per cent in the quarter and was up 0.9 per cent over the year.
A key measure of inflation, the implicit price deflator for household final consumption, was flat in the September quarter, from a rise of 0.5 per cent in the previous quarter, and was up 2.0 per cent over the year.
Farm GDP, in chain volume measures, rose 1.5 per cent in the September quarter and was down 3.9 per cent in the 12 months to September.
source: theaustralian.com.au
STUDIO 3 NEWCASTLE AUSTRALIA 