Westpac response to the data from Australia earlier today.

The data ICYMI:

Westpac's note is detailed, but just a few key points, beginning with the kicker:

  • the Australian economy is in transition. Earlier tailwinds are fading, and the impacts of high inflation and higher interest rates are beginning to become apparent. A sharp economic slowdown is in prospect for 2023.

WPAC see the strong household spending result as the re-opening effect from H1 leaked in Q3.

  • hours worked expanded by only 0.1%
  • Supply constraints are a factor, with the economy bumping up against capacity constraints. In addition, in the September quarter, there was elevated sick leave (around covid) and elevated levels of annual leave.

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I have seen takes that say the still-high level of household saving will be a cushion going forward, a support for domestic demand well into next year. The household saving level did drop back, but is still roughly double the pre-COVID level.

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I posted earlier on the USD losing some ground. AUD/USD is back where it started though:

aud growth slowdown 07 December 2022