KPMG Chief Economist Brendan Rynne comments on latest GDP figures

GDP growth by component

GDP 2018 Q4 highlights

  • The Australian economy has slowed dramatically during the final quarter of 2018, with GDP growth of only 0.2 percent q/q, and 2.3 percent y/y – which were consistent with KPMG forecasts released last week.
  • The primary causes of this slowdown in economic growth were:
    • a 3.4 percent decline in dwelling investment;
    • the combined effect of a 0.7 percent fall in exports and a 0.1 percent rise in imports, resulting in net exports dragging down GDP growth for the quarter by -0.2 percent; and
    • a substantial decline in investment by public corporations and defence spending.
  • Consistent with the slowdown in the established housing market, ownership transfer costs fell 6.6 percent for the quarter and are down 11.5 percent for the year.
  • Household consumption remained positive during the quarter, albeit it just at 0.1 percent q/q growth, which resulted in annual growth softening to 2.0 percent for the year.
  • Government consumption expenditure remained buoyant, up 4.2 percent for the quarter and 10.3 percent for the year, reflecting increased programme expenditures on activities like the NDIS as well as increased public sector employment.

Overall KPMG sees the short term economic outlook remaining mixed, although growth overall should start to lift during 2019. Household consumption growth will remain soft (but still positive), driven by continued (though lower) employment growth and low wages growth. Investment will continue to be weak, with both housing investment and business investment worsening in early part of 2019 before it turns around in the later part of the year. Government consumption will continue to help lift overall economic growth, but government investment needs to be lifted in order to counter the weakness in investment in the private sector. This should be a policy priority for both State and Federal Governments. The contribution of exports to GDP growth will lift due to the price increases already experienced for bulk commodities and base metals during 2019 Q1.

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