The annual rate of growth of the Australian economy in the three months to March is expected to have slowed faster than previously predicted. According to an Australian Associated Press (AAP) survey, the majority opinion of 12 expert economists is now predicting slower economic growth for the first quarter of 2015. Gross domestic product (GDP) is projected to be 0.50 per cent in the March, which would account for an annual growth rate of 1.90 per cent. The previous quarter’s annual growth rate was pegged at 2.50 per cent.
Quarterly growth through September last year came in at 0.40 per cent while the December quarter’s growth came in at 0.50 per cent, matching the March projections. The range of projections for the March quarter is between 0.30 per cent and 0.70 per cent and it is not expected to improve in the following quarters. The slower growth has been attributed to falling terms of trade, which saw a decrease of 1.20 per cent in the March quarter and a 10 per cent decline on the year. Weaker export prices in particular dragged on the Australian economy, hitting incomes specifically. "This double digit fall represents a significant negative income shock to Australia," said Westpac senior economist Andrew Hanlan.
Another key factor for the decline in economic growth is due to the headwinds facing the Chinese economy. Australia relies on China for both exports and imports. Developments in China over the past few years have caused a significant downturn in commodity prices, a particularly important sector for Australian growth. “Commodity prices tumbled as China's economy slowed and as global commodity supply expanded,” said Mr. Hanlan. Overall, the Westpac economist believes consumer spending will be “lukewarm” and wage growth to be less than ideal.
Author: Simon Herrmann
Jun 01, 2015
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.