Australia: Growth softens in Q1
Economic activity increased 0.2% on a seasonally adjusted quarter-on-quarter basis in Q1, following the previous quarter’s 0.6% expansion. The result came in slightly below market expectations.
Private consumption expanded 0.2% in Q1, following Q4’s 0.3% increase, as real incomes were buffeted by still-elevated inflation and tighter financing conditions. Meanwhile, fixed investment expanded 1.8% in Q1, swinging from the 1.0% contraction recorded in the previous quarter. A turnaround in both private and public investment was behind the reading, with non-mining investment leading the rebound. Meanwhile, government consumption dipped 0.1% in Q1 (Q4: +2.3% s.a. qoq). Overall, domestic demand contributed 0.5 percentage points to GDP growth, with no contribution from changes in inventories.
On the external front, exports of goods and services increased 1.8% in the first quarter (Q4: +1.4% s.a. qoq), supported by a recovering tourism sector. Meanwhile, imports of goods and services increased 3.2% in Q4 (Q4: -4.0% s.a. qoq). Overall, net trade subtracted 0.2 percentage points from the quarter-on-quarter expansion.
Meanwhile, in annual terms, GDP growth decelerated to 2.3% in the first quarter from 2.6% in the fourth quarter.
Commenting on the outlook, Lee Sue Ann, economist at UOB, stated:
“The latest GDP print is in line with our view of growth turning softer as high inflation and interest rates weigh. We see Australia’s GDP growth at 1.5% this year and only a small improvement to around 1.6% in 2024. Key factors to watch will be how households are impacted by higher interest rates, how quickly inflation is able to moderate and how wage growth ties in with labour market dynamics.”