Economy Slows as Corporate Australia Parties but Consumers Stay Home


But economists say the growth figures are disappointing because the strength in private investment has masked worryingly weak household consumption.

Wednesday's data from the Australian Bureau of Statistics showed gross domestic product (GDP) grew by 0.6 percent in the third quarter, from the previous quarter when it rose 0.9 percent.

Treasurer Scott Morrison said the figures indicated "solid" economic growth, however, with growth accelerating from 1.9 per cent to 2.8 per cent through the year.

He said Australia's economy was growing faster than the average growth rate of Organisation for Economic Cooperation and Development countries (at 2.6%), putting the economy "back up towards the top of the pack of major advanced economies".

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The composition of that latest national accounts was not good, as most components outside of private investment were soft, JP Morgan's chief economist for ANZ Sally Auld, said.

The GDP number was lower than market expectations for quarterly growth of 0.7 per cent and 3.0 per cent over the year to September, and is also below the previous quarter's revised 0.9 per cent increase.

THE Aussie dollar has experienced a sharp drop this morning after economic growth figures for the year to September were released. The household saving ratio increased from 3% to 3.2%.

The biggest fall in the September quarter was in agriculture, forestry and fishing, which declined by 4.1 per cent. Household consumption rose just 0.2 percent in the quarter, the smallest increase since late 2012. But household consumption grew by just 0.1% in the quarter and is tracking weak growth levels not seen in nearly a decade. "We believe it will", said Paul Dales, chief economist at Capital Economics.

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"The big concern is whether households, the engine of the economy, accept that expectations of a lift in wages growth are unjustified and it becomes necessary to adjust spending to a lower income outlook", he said.

This came despite compensation for employees increasing by 1.2 per cent for the quarter and 3.0 per cent over the past 12 months.

This was the result of stronger business investment and construction, especially engineering construction.

"For us, the key in the core of the economy is domestic demand and it's hard to see how momentum picks up there when you've got so many challenges for both consumers and household", Ong added.

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Corporate sentiment is high, buoyed by strengthening global growth and robust exports, contributing to a jump in private investment over the quarter.