Australia’s GDP expected at 2.4% in 2020 – UOB

Following the recent release of Q3 GDP figures in Australia, Economist Lee Sue Ann at UOB Group assessed the growth prospects for this year and 2020.

Key Quotes

“Australia’s GDP slipped to 0.4% q/q in 3Q19, down from a revised 0.6 q/q reading in 2Q19, and below expectations of 0.5% q/q. The below-trend 1.7% y/y annual expansion came in within expectations, a tad higher from the revised 1.6% y/y reading in 2Q19. Growth continued to be dragged lower by weak household spending, with domestic final demand remaining subdued, contributing just 0.2 percentage points. Government spending was up 0.9% and was the main contributor to growth in domestic final demand, reflecting ongoing delivery of services in disability, health and aged care. Net exports contributed 0.2 percentage points to growth for the third quarter.”

“The weakness in domestic demand continues to be the main story, with consumption growth remaining weak. Hiring momentum also seems to have weakened recently. All of these could negate the positive wealth effect expected from the nascent housing price recovery. In addition, private sector capital expenditures fell 0.2% in 3Q19, undershooting estimates for a flat outcome”.

“Our growth forecasts of 1.8% for 2019 and 2.4% for 2020 are lower than the RBA’s, which expects growth to return to around 2.75% in 2020 to 3.00% in 2021 going forward. Although we remain less optimistic than the RBA that growth will return to trend, the RBA seems to be strongly signalling their confidence in a better economic backdrop and therefore is likely to stay pat for some time.”