Sign Aussie economy is flatlining
Written by admin on June 4, 2024
Soaring imports for consumer goods like clothes, footwear and medicines, coupled with declining prices for key commodities including coal and iron ore, may have caused Australia’s economy to contract in the March quarter.
Australia’s current account plunged into a $4.9bn deficit in the first three months of 2024, far weaker than a forecast $5.1bn surplus.
Across the quarter, goods export volumes declined, reflecting reduced local coal and iron ore production; however, this was more than offset by an increase in good import volumes, led by a sharp restocking of consumer goods.
Meanwhile, services exports edged higher across the March quarter, as an increase in tourism was partly offset by falling international student numbers. However, with Australians shunning international holidays services imports were soft.
Owing to lower commodity prices for Australian iron ore and coal exports, alongside a decline in petrol prices on the import side, Australia’s terms of trade rose slightly.
As a result, net exports slumped to $17.8bn, with the decline expected to shave off 0.9 percentage points from Wednesday’s March quarter GDP reading, worse than the 0.6 reduction analysts had forecast.
Separate data released on Tuesday also showed inventories climbed as businesses restocked more than expected over the quarter.
“Some of this weakness will be offset by an increase in inventories,” Oxford Economics Australia’s Sean Langcake said.
“But, (net exports) will drive a weaker-than-expected growth result in the March quarter.”
Following the fresh figures, economists will refine their forecasts for the March-quarter national accounts data to be released on Wednesday.
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On the back of weakening consumer spending and declining construction activity, the data is expected to show the economy expanded by an anaemic 0.2 per cent in the three months to March, unchanged from the December quarter reading.
An outcome in line with consensus forecasts would be annual growth easing from 1.5 per cent to 1.2 per cent, well below projected population growth of 2.5 per cent and marking a deepening of Australia’s per-capita recession for a fourth consecutive quarter.
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