Hot Take: Solid growth, hidden pressures
Australia's December quarter GDP was robust but there are plenty of gremlins lurking beneath the surface, with implications for inflation and interest rates.
The all-important December quarter national accounts data were released this morning. I say all-important because, while a lagging indicator, they still contain a swath of information not available in any other statistical release.
So, what did they show? Real GDP increased by 1.3% from a year ago, while the per capita recession rolled into its seventh consecutive quarter. However, both improved from September and the per capita figure actually increased by 0.1% on a quarterly basis—the first positive movement in two years.
According to the ABS:
"Modest growth was seen broadly across the economy this quarter. Both public and private spending contributed to the growth, supported by a rise in exports of goods and services."
The rise in exports looks to be Aussie dollar-related, with services—specifically travel—where much of the change occurred. Here's the ABS again:
"Exports of travel services also increased with overseas travellers benefiting from the depreciation of the Australian dollar against the US dollar. A fall in the import of travel services also contributed to the positive movement in net trade as Australians opted for cheaper and shorter holidays."
So, Australians travelling overseas less and foreigners spending more time Down Under.
But there were plenty of gremlins in the release, too. State and federal government spending picked up again and was the main contributor to measured growth, with public demand rising close to a new record high 29.0% of GDP—well above the Reserve Bank of Australia's (RBA) forecast for the quarter.
When you're trying to get demand-driven inflation down, that's the opposite of what you want to see in the data.
But that wasn't even the worst of it.
