Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

WRAPUP 1-Australia's central bank holds fire as economy on the rebound

Published 05/09/2017, 03:45 pm
Updated 05/09/2017, 03:50 pm
© Reuters.  WRAPUP 1-Australia's central bank holds fire as economy on the rebound

© Reuters. WRAPUP 1-Australia's central bank holds fire as economy on the rebound

* Upbeat exports, government spending seen boosting Q2 GDP

* Many analysts revise up forecasts for growth data due Wed

* RBA leaves interest rates at a record low 1.50 pct

* Recent data consistent with expectations of a pick up - RBA

By Wayne Cole and Swati Pandey

SYDNEY, Sept 5 (Reuters) - Australia's economy likely rebounded sharply last quarter as exports and public spending proved surprisingly upbeat, an outcome that would cheer the country's central bank which left interest rates at record lows on Tuesday.

The Reserve Bank of Australia (RBA) has kept rates at 1.50 percent since last easing in August 2016 as it bets on a pick up in economic growth this year and next.

The flow of data is favouring the bank's optimism. Figures out Tuesday showed Australia managed to export more goods last quarter even as falling commodity prices widened the country's current account deficit.

Government spending also ran faster-than-expected in the June quarter as states splashed out on infrastructure, tilting the risks to the upside for growth.

"Exports came in on the higher side, and government spending was also very strong in the quarter," said Su-Lin Ong, chief economist at RBC Capital Markets.

"The risk to GDP growth is now on the upside. We will get an upward revision to where everyone is on GDP."

Ong nudged up her forecast for growth in gross domestic product (GDP) to 0.9 percent, from an initial 0.7 percent. Analysts at CBA also predicted growth of 0.9 percent, while Westpac tipped a 1.0 percent increase. ECONAU

That would be a marked improvement on the first quarter's pedestrian 0.3 percent pace, and faster than what the United States managed.

Growth for the year was seen edging up to around 2 percent.

The RBA is confident economic activity will reach around 3 percent in coming months. AU/INT

"The recent data have been consistent with the Bank's expectation that growth in the Australian economy will gradually pick up over the coming year," RBA Governor Philip Lowe said in a statement following the bank's monthly meeting.

"The outlook for non-mining investment has improved recently and reported business conditions are at a high level."

Most analysts polled by Reuters expect no change until late 2018 as the RBA remains worried about the outlook for consumer spending, which account for around 57 percent of GDP.

ADDING TO GROWTH

Tuesday's data from the Australian Bureau of Statistics showed the country's current account deficit widened to A$9.6 billion ($7.66 billion), from A$4.7 billion in the first quarter, mostly due to a pullback in commodity prices.

Australia's terms of trade, the ratio of export to import prices, duly fell 6 percent in the quarter.

Yet the volume of exports sold rebounded in the quarter to add 0.3 percentage points to GDP growth, when most analysts had expected a small subtraction.

Also helping was a robust rise in government spending, which analysts at Westpac estimated would alone add half a percentage point to growth in the quarter.

The outlook for exports is also upbeat as an acceleration in global factory output and unexpectedly brisk demand from China has recently boosted prices for a range of commodities.

Copper hit its highest in three years this week, while steel prices in China reached levels not seen since 2013 - supporting iron ore in the process.

The RBA index of commodity prices, which mirrors the country's export mix, climbed 1 percent in August to be up 16.6 percent on the same month last year. All of which is a boon to the country's hard-pressed miners.

($1 = 1.2531 Australian dollars)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.