Expectations that the economy may have avoided a contraction in the March quarter have been raised by data showing a narrowing of the current account deficit and improvement in net exports, economists say.
The seasonally adjusted current account deficit was $4.614 billion in the March quarter, the Australian Bureau of Statistics (ABS) said on Tuesday, equivalent to about 1.5 per cent of gross domestic product (GDP).
The ABS said net exports – the difference between import volumes and export volumes – would add 2.2 percentage points to GDP in the March quarter, after exports held up reasonably well in the quarter while imports declined sharply.
AAP economist Garry Shilson-Josling said this was the largest contribution to GDP from net exports since the June quarter of 1961.
The ABS is due to publish the national accounts for the March quarter at 1130 AEST on Wednesday.
ANZ Banking Group economist Alex Joiner said the large contribution of net exports would offset sharply lower business investment and residential construction.
“It now appears that Australia may have avoided two consecutive quarters of negative growth and hence a ‘technical recession’,” Dr Joiner said.
“ANZ is now forecasting GDP to expand by 0.4 per cent in the March quarter, reversing the 0.5 per cent fall in the December quarter and highlighting Australia’s relative economic resilience.”
ANZ had forecast last Friday a decline of 0.2 per cent in the March quarter.
ICAP senior economist Adam Carr also revised upwards his GDP forecasts from an 0.3 per cent contraction to a flat result.
Mr Carr said there was a strong probability that GDP would be positive.
“A straight read of the partial indicators actually does give you that figure, I only hesitate because the correlation of some of these data points to the national accounts is far from perfect,” Mr Carr said.
RBC Capital Markets senior economist Su-Lin Ong lifted her preliminary GDP forecast from a fall of 0.1 per cent to flat.
Other partial indicators have been mixed – construction work done, company profits and new capital spending were worse than expected, while business inventories fell less than the previous quarter and retail sales remained robust.
Even if GDP came in flat or slightly positive in the March quarter, it would not necessarily mean the nation would have avoided recession, indeed it could have already come and gone.
There is a possibility that changes to previous quarters may cause the September quarter result – growth of just 0.1 per cent – to be revised downwards.
A negative September quarter, followed by the 0.5 per cent contraction in the December quarter would fit the typical definition of recession, two consecutive quarters of negative economic growth.
That is, Australia would have slipped into recession but emerged out of it in the March quarter.