Dr Brendan Rynne, KPMG Chief Economist, responds to today’s GDP figures for Q4, 2019

As widely anticipated the GDP growth figure release today was 0.5 percent – it is modest but will begin to look impressive by the time we see the Q1 2020 figures. We are now in a new economic paradigm, started by the bushfires and now exacerbated by the coronavirus. While I still expect Q1 to be in positive growth territory, the risk is an accelerating downturn throughout rest of year.

The Q4 figures show a continuation of modest activity from Q3. During the second half of last year the Australian economy had been performing relatively poorly, compared with growth figures over Australia’s recent history. The Q4 figures show an understandable weakness in capex as businesses delay investment, although household consumption is slightly higher than expected, which is welcome.

After yesterday’s RBA rate cut to try and stimulate the economy, it is pleasing to hear this may now be matched by a fiscal stimulus package. KPMG is supportive of a co-ordinated approach to monetary and fiscal policy, rather than relying just on monetary policy.

Experience has taught us that any such fiscal stimulus measures need to be targeted, timely and temporary.

They are likely to deal with cash-flow issues for small to medium enterprises and measures to encourage investment and that many measures under consideration for the May Budget will be brought forward.

This would be beneficial. For example, talk of putting in place an Investment Allowance in the future, has the impact of diminishing investment in the interim, as companies delay their decisions with the prospect that the investment will cheaper if made after the announcement has taken place.

It may be appropriate for the government to consider additional expenditure for maintenance, which can be targeted to areas that need it and be spent relatively quickly.


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