Australia: Q4 growth stronger than expected, economy expands 2.6% in 2015
March 1, 2016
Australia’s economy defied expectation in the last quarter of 2015 as strong growth in private as well as government consumption supported its expansion and allayed fears of the impact of China’s slowdown. The economy grew 0.6% over the previous quarter. The print was less than the 1.1% recorded in Q3 2015; however, it beat market expectations of a 0.4% increase.
The data indicate that Australia’s domestic economy is adjusting well to the difficult conditions in its resource sector. While fixed investment fell 0.6% in Q4 (Q3: -3.3% quarter-on-quarter) as a result of a deterioration in construction associated with the mining and extraction sector, consumption growth remained resilient. Government consumption growth inched up from 0.6% in Q3 to 0.7% in Q4 as boosts to military spending took effect. Private consumption growth inched down to 0.8% in Q4 (Q3: +0.9% qoq); however, the figure is still comparatively high, and aside from Q3’s reading, it is the highest since Q4 2013. On a whole, domestic demand rebounded from last quarter’s 0.3% contraction and expanded 0.4%.
The external side of the economy did not perform as well as the domestic side. Export growth fell from 5.4% in Q3 to 0.6% in Q4. Although it is a substantial decrease, it is worth noting that poor weather earlier in the year had delayed a number of iron ore shipments form Australian ports, making export growth exorbitant in Q3. Therefore, although it did not contribute much to growth, the modest increase in exports still demonstrates positive momentum in exports. Imports increased 0.6% as well in Q4, contrasting the sharp 2.3% decrease observed in Q3. The fall in exports, and increase in imports has dropped the external sector’s contribution to growth from plus 1.6 percentage points in Q3 to zero percentage points in Q4.
Yearly GDP growth was 3.0% in Q4, marking an improvement from the 2.7% observed in Q3 and the highest figure since Q1 2014. Growth for the full year 2015 was 2.5%, down slightly from 2.6% in 2014.
Author: Robert Hill, Economist