Australia’s Q1 GDP growth picks up slightly to 0.4 pct q/q, annually slows down to 1.8 pct

Australia’s gross domestic product (GDP) for the first quarter of this year picked up a little in Q1 to 0.4 percent q/q, although annual growth continued to slow and is now down to 1.8 percent, its slowest pace since 2009 in the midst of the global financial crisis.

Growth continues to be held down by a weak household sector, although business investment and exports are hardly strong. The public sector is certainly doing its bit to support growth, contributing 1.3ppt to the 1.8 percent growth over the past year.

The result looks to be less than the average 0.6-0.7 percent q/q growth the RBA had expected for Q1 and Q2, and suggests that another round of growth downgrades are likely in the Bank’s August Statement on Monetary Policy.

The report shows that weakness in the economy has become more broad-based, and the supports to growth more narrow.

The household sector remains under pressure, with weak income growth and falling house prices weighing on both consumer spending (+0.3 percent q/q) and housing construction (-2.5 percent q/q).

Interestingly, household consumption growth was strongest in NSW and Victoria where house price declines have been the largest, suggesting that income growth is the main driver of weakness.

"The weak tone to GDP confirms the dovish stance taken by RBA Governor, Phil Lowe, but the Bank is likely to be disappointed yet again by these results," ANZ Research commented in its latest report.