Key points

• GDP rose by a weaker-than-expected 0.2% q/q (2.1% y/y). On the activity side, revisions, volatility and one-offs muddy the read at the component level, though a clear further slowing in both domestic final demand and GDP growth is evident.
• Household consumption was flat in the quarter with subsidies on electricity and childcare subtracting from measured growth, though easing supply issues saw a boost to spending on vehicles. On net, these “one-off” factors are broadly offsetting and their impact on growth will wane next quarter.
• That said, household consumption looks to have remained somewhat resilient despite the very significant headwinds to disposable income growth from higher rates, taxes and inflation. A key adjustment continues to come through a lower savings rate which fell to 1.1% in the quarter.
• Price and labour costs growth remains very strong. Consumption deflator growth accelerated to 1.5% q/q while the broader DFD deflator also edged higher. That said, both continued to moderate in annual terms, tracking at 5.3%, broadly around CPI inflation.
• Average earnings per hour grew strongly in the quarter, with a fall in average hours but strength in CoE. Nonetheless, it is only tracking at around the pace of the WPI in annual terms.
• Productivity rebounded somewhat in the quarter, but doesn’t paint a picture of strength, still well short of the RBA’s assumed 1% trend rate per year. Rather it suggests that the weakness in productivity over recent quarters has been overstated.
• Nominal unit labour costs growth accelerated in quarterly terms given the strong outcome in AENA which was only partially offset by the rebound in productivity and remain high in annual terms.
• We see little sign of a rebound in growth in Q4 based on higher-frequency data, still expecting annual growth over 2023 of around 1.5% and for below trend growth to continue in 2024.
• Overall, today’s result will have little impact for the RBA given these data lag and were largely expected.
• We continue to see the RBA lifting rates to 4.6% in February before remaining on hold until late 2024.

For further details please see the NAB Australian Economic Update – GDP (Q3 2023)