Overview

• NAB sees a +0.5% q/q (1.9% y/y) GDP print for Q3 2023. Consumption growth looks to have remained soft in Q3 (though was likely a touch higher than the 0.1% q/q outcome in Q2). Dwelling investment looks to have made a small contribution while the business investment partials point to an overall neutral impact on GDP. Both net exports and inventories have been volatile in recent quarters, but we expect trade to subtract 0.1ppts from growth, offset by a 0.2ppt contribution from inventories. Government spending is expected to make a small contribution to growth.
• For the RBA, such an outcome would confirm the economy is tracking through a period of below trend growth but has avoided major contraction. The support to activity from rapid population growth will be evident with per capita GDP likely falling further – reflecting a larger ongoing adjustment to pressures in the household sector at the individual level.
• That said, price pressures will continue to be reflected through ongoing strong growth in price deflators. It is likely the consumption deflator will track at around a similar pace in q/q terms, though there may be some easing on the investment deflators.
• Further, though typically volatile on a quarterly basis, the evolution of unit labour costs will also be important. Some of the unusually weak productivity outcomes over the past year may begin to unwind, leading to some easing in unit labour cost growth though average earnings growth per hour (which has remained relatively contained to date) is likely to accelerate further.
• Looking forward we continue to see below trend growth over the rest of 2023 and 2024. Overall, we see GDP growth of 1.5% over 2023 and 1.7% in 2024 before the pressure on households begins to ease and dwelling investment recovers. The pipeline of business investment and public infrastructure work remains elevated and will provide some support, while government spending will likely remain high.

For further details please see the Australian GDP Preview (Q3 2023)