Australia’s economy put in a better than expected performance during the back end of 2019, with GDP growing 0.5 per cent in the three months to December.
The rise in quarterly gross domestic product narrowly beat market consensus of 0.4 per cent growth, while annual growth accelerated to 2.2 per cent from 2.0 per cent in the September quarter.
Wednesday’s figures are largely free of the worst bushfire-related impacts and are too early to have felt the weight of the coronavirus-driven rout of the economy. The virus outbreak was reported only in late December.
Treasurer Josh Frydenberg said the figures showed a slight improvement in the Australian economy at the end of 2019. However, he acknowledged the March quarter numbers would take a significant hit.
“The coronavirus is impacting on the tourism, education, and export sectors, but also disrupting end-to-end supply chains,” he said.
“The measures the government has already put in place are designed to keep Australians safe, and that remains our first priority.
“As the Prime Minister has foreshadowed, the government is working on a targeted, responsible and scalable series of measures that are designed to keep business in business and Australians in jobs.”
Australian Bureau of Statistics chief economist Bruce Hockman noted growth in the December quarter was below the long-run average, but CommSec chief economist Craig James was more upbeat.
He heralded the data as the 28th consecutive year of economic growth.
“The gloomsters will be disappointed, again,” he said.
“The record economic expansion continues.”
While the construction industry lagged, consumer and government spending helped the economy, according to Mr James.
BIS Oxford Economics chief economist Sarah Hunter described momentum for 2019 as slow and steady.
“But conditions have clearly changed markedly since then,” she said.
“The coronavirus outbreak is putting a substantial strain on the global economy.”
The virus outbreak was a key factor in the Reserve Bank’s decision to cut the cash rate to a record low of 0.5 per cent on Tuesday.
In his address following the March board meeting, RBA governor Philip Lowe said earlier forecasts that the economy had reached a “gentle turning point” were under a cloud because of COVID-19.
“Prior to the outbreak, there were signs that the slowdown in the global economy that started in 2018 was coming to an end,” Dr Lowe said in his address after Tuesday’s RBA board meeting.
The details of Wednesday’s GDP result show domestic demand remained subdued, with 0.1 per cent growth in the December quarter.
A rise in household discretionary spending and continued increases in providing government services was offset by falls in home and business investment.
Household income remained steady.
Compensation of employees recorded its 12th consecutive rise, and increased by 1.0 per cent. This reflected a rise in the number of wage earners as well as a steady increase in the wage rate.
Australia’s bushfires and other weather-related events prompted a higher number of insurance claims, which contributed to household income.
The household saving to income ratio was 3.6 per cent.
This was affected by subdued consumption, steady increases in wages and more insurance claims.
The economy was boosted by the mining industry.
Production volumes grew by 1.6 per cent, strengthening through the year to 7.3 per cent. This was reflected in the growth in mining exports and inventories.
Falling prices for key export commodities impacted the terms of trade for the quarter, which fell 5.3 per cent.
This reduced nominal GDP, which fell 0.3 per cent, as lower coal, iron ore and gas prices contributed to more subdued company profits.
Mining profits declined 2.6 per cent for the quarter.
The Australian dollar edged slightly higher on the release of the data and was worth 65.94 US cents at 1250 AEDT.