Breaking News
0

Australia's Economy Slows, Casting Doubt on Central Bank Outlook

Economic IndicatorsDec 05, 2018 06:23
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
Australia's Economy Slows, Casting Doubt on Central Bank Outlook

(Bloomberg) -- Australia’s economy slowed last quarter as commercial construction fell and household spending slowed, casting doubt on the central bank’s outlook and all but ruling out an interest-rate increase next year.

The data are a blow to the Reserve Bank narrative of record-low rates fueling economic growth of around 3.5 percent this year and next to drive higher wages. It’s now contending with a less robust expansion at a time when house prices just recorded the biggest drop since the global financial crisis. That could prompt consumers to further rein in spending.

“The economy lost momentum moving in to the second half of 2018 centered on housing and the consumer, against the backdrop of a further tightening of lending standards to the housing sector,” said Andrew Hanlan, a senior economist at Westpac Banking Corp. “Business investment also took a step lower, led by mining, with the completion of major gas projects.”

The Australian dollar dropped, buying 73.13 U.S. cents at 12:50 p.m. in Sydney from 73.47 cents before the release. Cash-rate futures priced out any chance of an interest-rate increase through September next year and there’s now a less than 50 percent chance of a hike in 2020.

Key Insights

  • The household savings ratio fell to 2.4 percent from a revised 2.8 percent; household spending growth slowed to 0.3 percent from 0.9 percent the previous quarter
  • Non-dwelling construction fell 3.8 percent in the quarter as mining and energy projects were completed
  • Government spending on roads, bridges and railways has supported the economy; authorities are ramping up infrastructure projects to catch up with an expanding population; high immigration has been another key economic factor
  • The downside is the projects coincide with the late stages of a housing construction boom as public and private sectors compete for labor -- that’s forcing some residential builders to scrap projects due to excessive costs in a weakening property market

The RBA has kept interest rates at 1.5 percent for almost 2-1/2 years to spur the economy and lift inflation. It maintains that the next move is likely to be up -- having not hiked since late 2010.

House prices in Sydney are down 9.5 percent since July 2017, on the cusp of overtaking the peak-to-trough decline recorded during the last recession 27 years ago.

Australia's Economy Slows, Casting Doubt on Central Bank Outlook
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email