A further slowing in growth
NAB sees a +0.5% q/q (1.9% y/y) GDP print for Q2 2023 which will confirm the slowing in domestic demand we have seen across other indicators. Both ABS retail sales data and our own transactions data points to a flat outcome for consumption following 0.2% growth in Q1.
Business investment will provide some support to domestic demand, though the key driver of overall GDP growth this quarter looks to be a solid positive contribution from trade. Over the next two quarters we expect this pattern to persist with household consumption growth to dip slightly as real incomes continue to be squeezed. Elsewhere the accounts will provide a more comprehensive picture of the underlying dynamics in the economy, with the evolution of disposable income growth and the savings rate to provide useful insight into household cash flows and greater services spending information than is available in quarterly retail sales.
There will likely be few direct implications for policy in the near-term based on this release. We continue to see one final interest rate rise in November, although recent data and communication have increased the likelihood that interest rates have peaked – with the strength of services inflation in coming months critical. Further out, the outlook for growth will be increasingly important with rates in restrictive territory, inflation already moderating and the well-known lags between rates, activity and inflation still playing out. On our forecasts, we see the RBA beginning to ease in the second half of 2024 – taking the cash rate back towards a more neutral level of around 3% by early 2025.
For further details please see the NAB Australian Economic Update (GDP Q2 2023)
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