The Australian economy’s great rebalancing act had a touch of the wobbles in the September quarter.
Stronger housing and retail spending data over the past few months raised hopes that the non-mining parts of the economy were ready to balance out the expected fall in mining and resources investment.
However, official gross domestic product figures out on Wednesday showed that the economic growth was weighed down by weak consumer spending in the three months to September.
GDP grew at a sluggish 0.6 per cent in the September quarter, for an annual rate of 2.3 per cent, the Australian Bureau of Statistics said.
National Australia Bank senior economist David de Garis said the figures show that the non-mining sector of the economy was still quite weak.
“The complexion of growth does not tell a compelling story that the domestic economy has accelerated. In fact, it has remained quite soft,” he said.
“We had good contribution from net exports, we’ve seen iron ore exports really starting to accelerate but the domestic economy and consumer spending has been soft.”
Domestic final demand, a measure of total spending in the economy, rose only 0.4 per cent in the quarter, after a 0.7 per cent in the June quarter.
Mr de Garis said the figures would keep in place the possibility of a Reserve Bank of Australia interest rate cut in the new year.
“The RBA certainly wouldn’t be revising up their (economic growth) forecasts at all, based of what they’ve seen today,” he said.
“Our baseline forecast still has another cut in the cash rate pencilled in for May 2014, timing as usual depending on the data flow.”
HSBC chief economist Paul Bloxham said the rebalancing of the Australian economy is yet to come.
“Our central case remains that growth will rebalance further in coming quarters,” he said.
“We expect this to mean that the RBA will not need to deliver more rate cuts, although further signs of rebalancing are clearly needed.
“The recent fall in the Australian dollar is expected to support this rebalancing.”
Mr Bloxham said economic growth continues to be supported by mining investment and rising commodities exports as new projects start production.
“Growth remains sluggish and below trend, although it is not disastrously weak,” he said.
“This suggests that the domestically-produced stages of the mining investment boom have continued to support growth in recent quarters. In broad terms, mining investment has `plateaued’ rather than plummeted and so is not yet a drag on growth.”
