Growth holds steady in Q2

Economic activity increased 0.4% on a seasonally adjusted quarter-on-quarter basis in Q2, matching the previous quarter's expansion. The result came in above market expectations. Private consumption expanded 0.1% in Q2, following Q1’s 0.3% increase, as real incomes were buffeted by still-elevated inflation and tighter financing conditions. Meanwhile, fixed investment expanded 2.4% in Q2, matching the increase recorded in the previous quarter. Both private and public investment continued to expand. Meanwhile, government consumption rose 1.4% in Q2 (Q1: -0.1% s.a. qoq). Overall, domestic demand contributed 0.7 percentage points to GDP growth, while destocking subtracted 1.1 percentage points, as companies lightened their warehouses—especially grain, motor vehicles and mining inventories. On the external front, exports of goods and services jumped 4.3% in the second quarter (Q1: +1.8% s.a. qoq) on the back of rising international demand for mining commodities, increased educational travel and a recovering tourism sector—supported by increasing Chinese tourist numbers. Meanwhile, imports of goods and services increased by 0.7% in Q2 (Q1: +3.6% s.a. qoq). Overall, net trade added 0.8 percentage points to the quarter-on-quarter expansion, swinging from the previous quarter’s 0.3 percentage point subtraction. Meanwhile, in annual terms, GDP growth decelerated to 2.1% in the second quarter from 2.4% in the first quarter. Commenting on the release, Lee Sue Ann, economist at UOB, stated: “The latest GDP print remains in line with our view of growth turning softer. The effects of inflation and interest rates will continue to dominate over the coming quarters. Despite underlying population growth, real consumption is expected to decline. […] On the external front, with China being the top trading partner for raw-materials exporter Australia, China's slowdown will inevitably put pressure on the Australian economy.” Meanwhile, Robert Carnell, analyst at ING, assessed the likely effects of the GDP print on monetary policy: “The revised data do suggest that the economy is in a slightly stronger position than was assumed before their publication, and that could keep thoughts of a final rate hike later in Q4 2023 from being extinguished completely.”

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