Australia: GDP growth slows unexpectedly in Q4
Australia’s economy slowed for a second successive quarter in Q4, according to figures recently released by the Australian Bureau of Statistics (ABS). GDP expanded 0.4% quarter-on-quarter in seasonally-adjusted terms, down from a revised 0.7% in Q3 (previously reported: +0.6% quarter-on-quarter) and markedly undershooting analysts’ expectations. On an annual basis, the economy grew 2.4%, down from Q3’s revised 2.9% (previously reported: +2.8% year-on-year).
On the domestic front, the expansion was driven by household consumption (Q4: +1.0% qoq; Q3: +0.5% qoq), buoyed by improved consumer sentiment, population growth and a stronger labor market. Government spending, which was up substantially, also supported growth in the fourth quarter (Q4: +1.7% qoq; Q3: 0.2% qoq). However, fixed investment dropped 1.2% qoq (Q3: +2.4% qoq), although this was likely influenced by the near-completion of several LNG plants under construction. Non-mining investment was significantly stronger in the quarter, capping off a solid 2017, on the back of positive sentiment and robust global growth.
Exports contracted 1.8% in Q4 (Q3: +1.2% qoq) on lower exports of rural goods, transport equipment and travel services, while imports grew 0.5% (Q3: +2.2% qoq). As a result, the external sector’s net contribution slipped from minus 0.3 percentage points in Q3 to minus 0.5 percentage points in Q4.
Looking ahead, growth is likely to strengthen somewhat. Non-mining investment should continue picking up, supported by healthy global economic activity, accommodative monetary policy and continuing rapid domestic population growth. In addition, exports should receive a significant boost from greater LNG output, as the Gorgon and Wheatstone projects ramp up production and other projects reach completion. Private consumption should also be supported by a tighter labor market and a gradual pick-up in wage growth.