Australia’s economy expanded slower than forecast in the three months through September, underscoring the likelihood of the central bank remaining on the sidelines for much of next year.
GDP rose 0.6% from prior quarter vs estimated 0.7% gain.
GDP climbed 2.8% from year earlier vs forecast 3% rise.
Non-dwelling construction soared 18.4% adding 0.9 percentage point to growth, household spending rose 0.1%, adding 0.1 point.
Public investment fell 7.5%, cutting 0.4 point from growth.
Household savings ratio was 3.2% in third quarter, up from revised 3% in prior three months.
Aussie dollar fell to 75.80 U.S. cents at 11:34 a.m. in Sydney vs 76.12 before data.
Australia’s economy is deep in transition toward services industries and away from mining investment, a period of upheaval that’s suppressed growth and wages. The shift has been helped by a burst of full-time hiring this year as more firms gain confidence. The Reserve Bank of Australia has signaled no near-term policy change as it provides companies and households some certainty they’re not about to be hit with higher borrowing costs.
It’s paying off on the commercial side. Business conditions -- a gauge of the environment firms are operating in and closely watched by the RBA -- are at a record high and firms are beginning to invest. Yet households, which should be on the other end of these transactions, are mired in debt and struggling with recession-era levels of wage growth.
Meanwhile, China’s insatiable demand for Aussie iron ore to produce steel for skyscrapers and apartment blocks is entering a more mature phase; at the same time, its burgeoning middle class is boosting demand for Australian education for their children and tourism as their economy also transitions,proving a bonanza Down Under.
Education exports to China were worth A$9 billion ($6.8 billion) in fiscal 2017, up 260 percent in a decade; and more than a million Chinese tourists visited Australia last year, a figure predicted to more than triple by 2026.
Australia’s central bank says it expects 3 percent GDP growth for the next couple of years. Given Treasury estimates the economy’s speed limit is 2.75 percent, that would start soaking up spare capacity, which Governor Philip Lowe on Tuesday signaled is starting to happen already.
“Forward-looking indicators continue to point to solid growth in employment over the period ahead,” Lowe said after leaving the cash rate at a record-low 1.5 percent for a 15th meeting. “There are reports that some employers are finding it more difficult to hire workers with the necessary skills. However, wage growth remains low. This is likely to continue for a while yet.”