Australia is set to post a second consecutive quarter of economic growth, which would beat Reserve Bank expectations following a run of better-than-expected economic data, economists say.
The national accounts published by the Australian Bureau of Statistics (ABS) are expected to show gross domestic product (GDP) grew by 0.7 per cent in the June quarter, according to the median of 14 economists surveyed by AAP.
The median forecast for annual GDP growth was for an expansion of 0.7 per cent, above the Reserve Bank of Australia’s mid-August prediction of 0.25 per cent in year to June.
“It’s looking like a fairly evenly firm quarter,” said RBC Capital Markets senior economist Su-Lin Ong.
“Consumption, as we know from quarter two retail sales data, was very strong.”
Ms Ong was also upbeat about the outlook for the remainder of 2009.
“Everything’s pointing to a fairly decent second half in Australia.”
In mid August, RBA governor Glenn Stevens said the nation could face some economic weakness in the near future.
“It’s in fact even possible we’ll get another contraction some time in the next couple of quarters,” he told a public hearing of the House of Representatives economics committee meeting in Sydney.
A week before, the central bank had forecast GDP to rise by 0.5 per cent over 2009 before lifting to one per cent in the year to June 2010 and by an annual 2.25 per cent through 2010.
But several of the economists surveyed by AAP upwardly revised their GDP predictions following the release on Thursday of capital spending data.
The ABS said new private capital expenditure rose 3.3 per cent in real terms, seasonally adjusted, in the June quarter, easily beating market predictions of a five per cent fall in the three months to June.
Earlier in the month, ABS data showed that retail sales rose by two per cent over the June quarter, after adjusting for inflation, and above the 1.3 per cent predicted for the quarter.
Both capital expenditure and retail sales data are components of GDP.
Michael Turner, an economist with 4Cast financial markets group, said the surge in capital expenditure was the driving force behind his firm’s upward revision – from 0.2 per cent in the quarter to 1.3 per cent.
But he said that net exports, another component of GDP, made precise predictions difficult.
“Net exports, its a wild card really,” he said.
“The way they measure prices for the exports, it makes it very hard to pin down just how they’re going to work out the volume of exports.
“At the moment we have exports adding 0.6 percentage points to GDP, but there’s a lot of uncertainty in forecasts surrounding that.”
Net exports is the difference between imports and exports in real terms.
Because imports are not included in GDP but exports are, the measure of net exports is the difference between aggregate spending and total output or GDP.
A positive GDP number for the June quarter would be the second in a row for the nation, which narrowly avoided a recession in the three months to March when it posted 0.4 per cent growth.
In the previous quarter, GDP contracted by 0.6 per cent. Back to back quarters of contraction is widely considered to be a definition of recession.
ICAP economist Adam Carr said that the recent data, combined with government stimulus, pointed to one per cent growth for the quarter.
“An argument can be made that household accounts have been boosted by stimulus,” he said.
“I don’t think we’ve even begun to see the impact for investment or the infrastructure component of the fiscal strategy. That’s still to come. That’s a second half 2009, early 2010 story.”
“For the business side of it, a small amount is related to fiscal stimulus. But for quarter two it’s more about the cash handouts to households.”
The federal government announced two fiscal stimulus packages in a bid to support the economy – October’s $10.4 billion package and $42 billion worth of extra spending unveiled in February.
The ABS is due to release its GDP figures on Wednesday, September 3.