Australian economy was slowing fast in March-quarter 2017 and outlook negative

Last week, we learned that private new capital expenditure had risen by 0.3 per cent in the March quarter but was still 9.3 per cent down on the March-quarter 2016 outcome. The forward-looking estimates for 2017-18 have also improved somewhat but still lies well below the expected outcome at the end of June 2017. So, perhaps the massive decline in private investment spending is abating somewhat. In the December-quarter 2016 National Accounts release, the ABS estimated that Today, the Australian Bureau of Statistics real GDP had risen by a strong 1.1 per cent which followed a negative 0.5 per cent outcome in the September-quarter 2016. The results were driven by strong household consumption growth (even as wages growth was negative), public investment and net exports (on the back of a massive shift upwards in the terms of trade). I said at the time that it was doubtful this was setting a new trend away from the sluggish growth that Australia had fallen into in recent years as a result of declining private investment and a government intent on austerity. And that assessment proved to be accurate when the ABS released the – March-quarter 2017 National Accounts data – today, which showed that real GDP had risen by just 0.3 per cent in the March-quarter 2017. Annual growth (last four quarters) was just 1.7 per cent around half the trend rate before the GFC. Net exports undermined growth by 0.7 percentage points, despite the improved terms of trade. Inventory accumulation added 0.4 percentage points, which indicates how unstable the growth profile was earlier in the year. Private and public consumption expenditure contributed 0.5 points, although the household saving ratio fell again indicating the tenuous nature of private consumption expenditure. Remember that the National Accounts are a rear-view mirror of where the economy was 3 months ago. But the overall trend is not terribly optimistic, especially with the government intent on cutting back its contribution to growth in the coming year.

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