4 Jun 2015
Better employment data to bode well for Australian growth ahead - DB
FXStreet (Barcelona) - Adam Boyton, Chief Economist at Deutsche Bank, reviews the Australian GDP data release and further expects a consistent rise in labour market data to lead to a quarterly Australian GDP growth at 0.7%/0.8%qoq.
Key Quotes
“In Australia the Q1 national accounts data reported a 0.9% qoq increase in GDP in Q1 (+2.3% over the year). The first question to address with the set of national accounts is this: do we really believe that the economy grew marginally above its long run average pace of growth in Q1? In our view there are good reasons to think that the headline GDP print is a broadly appropriate (albeit marginally better than expected) description of the economy over Q1.”
“After all, the unemployment rate averaged 6.2% in Q4 2014 and is 6.2% currently (i.e. April). Over the past 20 years the unemployment rate has only declined at an average rate of 0.1 ppts a year. The business conditions measure in the monthly NAB survey averaged +4 over Q1, was +4 in the most recent survey, with the 20 year average also at +4. That is, our favoured top-down economy wide indicators (the labour market and the NAB survey) suggest a pace of growth around Australia’s long run (i.e. 20 year) average. In that vein the 0.9% qoq increase published today by the ABS is marginally above the long run average of circa 3¼% yoy / ~0.8% qoq.”
“That said, as long time observers of the Australian GDP data would note, a 0.1 ppt difference is in the big scheme of things neither here nor there.”
“Looking forward: do we expect such a pace of growth – i.e. something around the long run average to be maintained? Here we note the further pick-up in our labour market tracker, which is now consistent with jobs growth of ~20k a month. Should employment rise around that pace, then quarterly GDP growth outcomes around the region of 0.7% / 0.8% qoq would seem reasonable.”
Key Quotes
“In Australia the Q1 national accounts data reported a 0.9% qoq increase in GDP in Q1 (+2.3% over the year). The first question to address with the set of national accounts is this: do we really believe that the economy grew marginally above its long run average pace of growth in Q1? In our view there are good reasons to think that the headline GDP print is a broadly appropriate (albeit marginally better than expected) description of the economy over Q1.”
“After all, the unemployment rate averaged 6.2% in Q4 2014 and is 6.2% currently (i.e. April). Over the past 20 years the unemployment rate has only declined at an average rate of 0.1 ppts a year. The business conditions measure in the monthly NAB survey averaged +4 over Q1, was +4 in the most recent survey, with the 20 year average also at +4. That is, our favoured top-down economy wide indicators (the labour market and the NAB survey) suggest a pace of growth around Australia’s long run (i.e. 20 year) average. In that vein the 0.9% qoq increase published today by the ABS is marginally above the long run average of circa 3¼% yoy / ~0.8% qoq.”
“That said, as long time observers of the Australian GDP data would note, a 0.1 ppt difference is in the big scheme of things neither here nor there.”
“Looking forward: do we expect such a pace of growth – i.e. something around the long run average to be maintained? Here we note the further pick-up in our labour market tracker, which is now consistent with jobs growth of ~20k a month. Should employment rise around that pace, then quarterly GDP growth outcomes around the region of 0.7% / 0.8% qoq would seem reasonable.”