Australian Economy

Australian GDP slows further | snaps

GDP growth in Australia has been slowing since 2Q22 when the reopening of the economy temporarily lifted economic activity dramatically. Since then, the Reserve Bank of Australia (RBA) has been engaged in a battle to try to squeeze rampant inflation out of the economy, while simultaneously trying to avoid tipping the economy into a sharp recession. So far, this seems to be working.

Following a 0.2% quarter-on-quarter increase, the annual growth rate in 1Q23 has slowed to 2.3% year-on-year from 2.6% in 4Q22, and we expect it to slow further. Household consumption has driven the decline in growth, with occasional fluctuations from inventories or net exports adding volatility. But the key observation in the latest set of data is that really nothing, including business investment, is picking up the slack from consumption. There are no obvious factors in the pipeline that may lift the numbers in the coming quarters. So growth will probably slow a little further, or at best pootle along at similar low growth rates over the next couple of quarters. That means that full-year GDP growth should come in at about 1.7% according to our latest calculations, though probably a little lower rather than higher if we consider the balance of risks.

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