Initial comments from Westpac (Andrew Hanlan) on the Australian GDP today:

Bolding is mine


Exports and some inventory rebuilding drove growth in the March quarter

  • Net exports added 0.5ppts to growth
  • Inventories added 0.3ppts

Domestic demand stalled in the quarter - flat result in the quarter, annual domestic demand growth lower to 0.8%.

Incomes remain under intense pressure as the terms of trade declines (-2.9% in the quarter to be 11.4% lower than a year ago)

  • Wages growth particularly weak - nominal wage incomes rose by 0.1% in the quarter
  • spare capacity in the labour market

Nominal GDP growth was a sluggish 0.4% in the quarter ... annual growth slowed to 1.2%, weakest result since 2009

The surprises relative to our expectations were across the three measures of GDP:

  • The expenditure measure was softer, at 0.8% vs f/c 1.0% - consumer spending and business investment surprising to the downside
  • The income measure surprised to the high side, at 1.1% vs f/c 0.7% - largely because prices fell faster than anticipated, with the GDP deflator at -0.5% vs f/c -0.2%
  • The production measure also provided an upside surprise, 0.8% vs f/c 0.5%

Household disposable income fared better, up 0.4%, while real household disposable income was weak at 0.1%qtr, 1.3%yr

  • Households are supporting spending by lowering their savings rate

Business investment -3.5%qtr, -6.0%yr

  • Mining investment continues to deflate, with much further to go
  • Private engineering activity fell 9.8% in the quarter
  • Total equipment investment fell by 2.6% in the quarter, which was weaker than the -0.5% reported in the capex survey.

Housing, 4.7%qtr, 9.2%yr.

  • Home building is the bright spot
  • Boosted by record low and falling interest rates
  • Activity rose almost 5% in the quarter and by in excess of 9% over the past year

Public demand is weak

  • Government revenue collections disappointing
  • Public demand edged 0.2% higher in the quarter but fell 0.6% over the past year
  • With public demand accounting for 20% of the economy this is a major additional headwind