Judging from the weaker than forecast final data for the December quarter’s national accounts, and the even weaker January data, the Australian economy has moved very close to the edge of a slump into negative territory before the coronavirus hit in February.
The last of Australia’s September to December quarter gross domestic product GDP data – the current account and government financing transactions were weaker than forecast in releases on Tuesday from the Australian Bureau of Statistics.
The balance of payments data from the Australian Bureau of Statistics for the December quarter showed the current account surplus narrowing by 85 percent to just $1 billion.
Bureau chief economist Bruce Hockman said it was the third consecutive current account surplus but the big drop would mean net exports would add only 0.1 percentage points to the December national accounts.
“Falling prices for bulk commodities and a decrease in non-monetary gold volumes drove the smaller current account surplus for this quarter,” he said in a statement with the current account data on Tuesday.
Government spending data, also released by the bureau, showed general government spending up by 0.7 percent in the quarter. This is tipped to add 0.1 percentage points to growth. Many economists had been expecting a bigger contribution to growth from the government sector.
January’s building approvals have just been released slumped by 15.3% driven by a 36% plunge in approvals for units and townhouses. Now the latter is very volatile and helped power a surprise rise in December approvals, but the size of the fall was a shock to the market.
The AMP’s Chief Economist, Shane Oliver says the data yesterday and Monday (for business indicators) says there “is a risk that it (the December quarter GDP reading) could be negative, even before the bushfires and coronavirus likely knocked the economy backwards in the current quarter.
“We have revised down our December quarter GDP growth forecast to zero or 1.6% year on year (from +0.3% quarter on quarter), he wrote yesterday.
In fact, RBA governor Phil Lowe alluded to the weakness in the economy:
“The coronavirus outbreak overseas is having a significant effect on the Australian economy at present, particularly in the education and travel sectors. The uncertainty that it is creating is also likely to affect domestic spending. As a result, GDP growth in the March quarter is likely to be noticeably weaker than earlier expected,” Dr. Lowe said in his post-meeting statement yesterday.
Capital Economics also downgraded their forecast for quarterly economic growth from 0.6% to 0.4% as a result.
“In light of the softer-than-expected data on net trade and government finances, we are cutting our estimate for October to December quarter GDP to 0.4 percent,” Capital Economics’ Ben Udy told clients.
“That would be in line with the subdued rise in July to September 2019 (Q3) but would be consistent with annual growth rising to 2.0 percent from 1.7 percent in Q3.”
Seasonally adjusted the estimate for total dwellings approved fell 15.3% in January, driven by a 35.5% slump in private dwellings excluding houses.
This was largely due to weakness in approvals for apartments (which is volatile from month-to-month), especially in Victoria, the ABS said.