The GDP data is here: Australia – Q2 GDP comes in at 0.5 % q/q (vs. +0.4% expected)

Westpac:

Australia Q2 GDP will not be a surprise for the RBA – in their August Statement on Monetary Policy the RBA forecast GDP growth to be 3.0% in the year to June quarter 2014

Record low interest rates are a key tailwind for growth, but the economy remains constrained by a number of headwinds

  • In particular: a tightening of fiscal policy; a slowing of growth in China, triggering a decline in our terms of trade; a still high currency; and a downturn in mining investment

Of key interest is the momentum heading into the September quarter. On that front, there are some encouraging signs:

  • Consumer sentiment is recovering following an initial negative reaction to the Federal budget
  • Private business surveys report a strengthening of business conditions in the month of July, with the NAB survey index at its highest level in over four years
  • Business credit is advancing and investment by the services sectors trended higher over the past year and the most recent Capex survey points to a further lift in investment by the services sectors in 2014/15

RBC Capital markets:

  • GDP is a tad firmer nut not far from consensus or RBA’s own forecast
  • A pretty modest pace of growth consistent with a bit of loss of momentum in activity in recent months
  • Domestic demand was fairly subdued in the quarter with net exports dragging heavily, growth was helped out by a correction in inventory
  • Q3 is looking slightly better but it’s not going to be enough to get back to above trend growth any time soon
  • There is a number of headwinds in the second half – the resource capex downturn will intensify and the labour market is looking patchy
  • I think we’ll muddle along at this very modest pace of growth for some time
  • I see the RBA on hold for the foreseeable future

CBA:

  • The economy continues to track along, the second quarter was worse than Q1 but there’s a fair amount of statistical payback here, and when we average out the first half it looks like GDP growth tracking along at 3 percent per annum – so a trend-type outcome, and one that looks good when you benchmark it against all the negatives that were at work through that period
  • There are encouraging signs that the transition story is moving along and would expect that to continue based on some of the leading indicators we’ve seen
  • It’s probably a touch stronger than the Reserve Bank was expecting and we think this transition story is a bit more advanced than they think, it certainly seems there’s little chance of a rate cut any time soon, and the next move will be up, clearly there’ll be no rush, and we’re sticking with our February 2015 call at the moment

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Still to come today …. at 1.20pm Sydney time (0320GMT, 2320NY time):

  • Address by Glenn Stevens, Governor of the Reserve Bank of Australia (RBA), to the Committee for Economic Development of Australia (CEDA) Luncheon