Australia’s economy is poised to show a solid pick-up in momentum through the September quarter, according to Westpac, which expects next week’s National Accounts (due on December 3) to confirm a stronger and more synchronised recovery across key parts of the economy.
The bank is forecasting Q3 GDP growth of 0.8% quarter-on-quarter, lifting annual growth to 2.3%, a touch above the Reserve Bank’s newly updated 2.0% trend estimate. Westpac says its numbers are broadly aligned with its real-time Westpac-Now model, which has been signalling firming underlying momentum heading into year-end.
A standout feature of the expected result is the strength in domestic demand, which Westpac believes surged 1.5% in Q3, the strongest quarterly rise since early 2012. The bank says the upswing is becoming increasingly broad-based, with multiple sectors contributing rather than activity relying on isolated pockets of strength.
Westpac cautions that headline growth should moderate over the next few quarters as unusually large capital-expenditure items, notably aircraft purchases, roll off. Even so, stripping out those one-offs leaves underlying growth at a healthy 0.6% for the quarter, pointing to resilience beneath the surface.
The bank also expects productivity to show a meaningful rebound, rising 0.9% over the year. That, in turn, would help slow nominal unit labour cost growth to around 2.5% on a six-month annualised basis — a development Westpac says would be “encouraging” for the Reserve Bank as it weighs the inflation outlook.
This article was written by Eamonn Sheridan at investinglive.com.