Australia Q2 GDP to rise modestly; net exports likely to drive volatility in growth

Economic growth in Australia is expected to have risen modestly during the second quarter, with a risk of a slightly stronger number. However, the volatility in GDP growth looks to have been driven once again by net exports.

Australia’s Q2 gross domestic product is expected to have risen 0.4 percent in the quarter. While this is only a modest quarterly rise, it would bring annual growth to a strong 3.3 percent y/y. The main new pieces of information since the preliminary forecast are stronger-than-expected inventories, wages and government spending, and slightly weaker profits, ANZ reported.

In addition, based on today’s latest release of the country’s Balance of Payments, it has swung from a contribution of 1.1ppt in Q4 to a subtraction of 0.2ppt in Q2. The volatility in the quarterly data makes it more difficult to read the underlying momentum in the economy, but an annual growth of 3.3 percent reveals a story of an ongoing solid recovery.

Meanwhile, a rise of 0.4 percent q/q would be in line with the forecasts published in the latest Statement on Monetary Policy. On this front, the average wages number in the GDP report looks likely to show some further modest improvement, although inflation is still expected to remain low, particularly given the recent sustained fall in inflation expectations, the report added.