ONLY CHARTS #223

Aus Q3 government demand & trade, NZ Q3 trade, Aus consumer confidence

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Following the release of partial GDP indicators, we expect Australia’s Q3 GDP to print at ~0.5% q/q. An upside surprise to government spending was offset by a lower-than-expected net exports contribution. Strength in outbound travel spending by Australians has led us to revise up our estimate for Q3 household consumption growth.

1. Underlying public demand (ex asset transfers) rose +2.1% q/q in Q3 in Australia and contributed 0.6ppts to quarterly GDP growth. This was stronger than we had assumed.

Separately, public inventories contributed 0.1ppts to Q3 GDP growth after contributing 0.2ppts in Q2.

Government consumption rose a strong +1.4% q/q, with state & local spending (+2.2% q/q) boosted by state government subsidies and rebates (including for electricity). This was close to our estimate.

As hinted at by Construction Work Done data, underlying government investment (excluding asset transfers) rose a whopping +5.3% q/q - stronger than we had expected. A 35% q/q rise in defence spending also contributed heavily.

Over the year to Q3, government consumption rose +4.7% and contributed a significant 1ppt to Australia’s GDP growth.

2. Net exports contributed just +0.1ppts to Australia’s Q3 GDP growth, which was below our expectation. The downside surprise was largely due to a large drag from net services trade (-0.4ppts) where we have little partial information to go on.