Weak GDP figure unlikely to prompt another rate cut, says economist
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Version 0 of 1. A weaker-than-expected pace of economic growth during the September quarter won't be enough to prompt another interest rate cut early next year, a senior economist says. Gross domestic product (GDP) grew by 0.6% following a 0.7% pace in the June quarter, Australian Bureau of Statistics (ABS) figures released on Wednesday showed. The figure was below market expectations of a 0.7% increase and sparked a fall in the Australian dollar of more than half a US cent to US90.75c. Commonwealth Bank’s chief economist, Michael Blythe, said the Reserve Bank of Australia (RBA) was more likely to try and talk down the high local currency rather than embark on another interest rate cut as a result of the disappointing GDP. "The interest rate sensitive parts of the economy are moving the way they want – not as clear as it could be in this data," he said. “We'll hear them continuing to talk about the need for a lower currency to help with the growth transition." GDP growth was 2.3% in the year to September in seasonally adjusted terms, the ABS data showed. A survey of 13 economists had indicated an expected 2.5% annual growth. Blythe said construction weakness was a major factor. "The construction numbers are a bit weaker ... but we've got an economy that's still going ahead but, obviously, at a well-below trend type pace," he said. National Australia Bank senior economist David de Garis said the figures showed that the non-mining section of the economy was still quite weak. "The complexion of growth does not tell a compelling story that the domestic economy has accelerated. In fact, it has remained quite soft," he said. "We had good contribution from net exports and we've seen iron ore exports really starting to accelerate, but the domestic economy and consumer spending has been soft." Domestic final demand, a measure of total spending in the economy, rose 0.4% in the quarter, following 0.9% rise for the year to September. De Garis said the figures would keep in place the possibility of a central bank interest rate cut in the new year. "The RBA certainly wouldn't be revising up their [economic growth] forecasts at all based on what they've seen today," he said. Our editors' picks for the day's top news and commentary delivered to your inbox each morning. |