The economy of Australia in its Q3 increased when compared to before

June 8, 2023: Australia’s initial-quarter awful domestic product increased by 2.4% yearly, just barely below reviewer anticipations.

Economists polled had forecast an increase of 2.4%, reached to the 2.7% expansion in the fourth quarter of 2022. On a quarter-on-quarter basis, GDP increased by 0.2%, compared to the 0.3% expected in the Reuters poll.

Katherine Keenan, head of National Accounts at Australia’s Bureau of Statistics, stated, “This is the sixth straight incline in quarterly GDP, but the slow growth from the Covid-19 Delta lockdowns in September quarter 2021.”

“Private and public awful fixed capital construction were the main drivers of GDP growth this quarter,” Keenan said.

The GDP tasks are critical to the Reserve Bank of Australia’s decision-making procedure for its monetary policy. On Tuesday, the RBA surprised needs and raised its standard guideline prices by 25 basis points to 4.1%, an 11-year high.

On Wednesday, Reserve Bank of Australia Governor Philip Lowe delivered a speech at the Morgan Stanley Australia Summit, reiterating his assignment that the central pool will seek to navigate a “narrow path” in the country’s economic policy.

In this “narrow path” that Lowe envisions, Australia’s inflation returns to its 2% to 3% target range, the economy continues to grow, and gains in the labor market are maintained.

“It is still possible to navigate this path, and our ambition is to do so. But it is a narrow path and likely to be a jagged one, with risks on both sides,” Lowe said.

Lowe clarified that the intention to maintain labor market improvement “does not mean that it will tolerate more elevated inflation persisting.”

As such, the decision to increase interest speeds again was taken on Tuesday “to provide greater certainty that inflation will produce to target within a reasonable timeframe,” he stated.

Lowe listed the economic data points that the RBA will watch to craft its moves forward, including the international economy, household spending, and growth in work unit costs.

Abhijit Surya, the Australia and New Zealand economist at Capital Economics, thinks that while GDP has stalled and is forecast to slow more, productivity change stays “dismal.”

Surya wrote that GDP per hour worked decreased by 0.3% quarter-on-quarter, resulting in a 4.6% annual decline in productivity, the largest on record.

He also adds that labor demand data suggests that productivity will most likely have weakened further this quarter, which will prop up unit labor cost growth and keep benefits inflation stubbornly high.

Surya currently has a peak estimate of 4.35% for the RBA’s benchmark rate, but in light of the GDP readings and Rowe’s address, he stresses that “there is a genuine chance that the RBA could increase rates even higher.”