Westpac cuts GDP growth forecasts as trade gains wane
Westpac cut its growth forecasts for the economy after the contribution from trade for the June quarter came in at half the size expected by the market.
Australia's current account deficit narrowed to $11.801 billion in the June quarter, as rising export volumes helped offset lower commodity prices. The result was in line with analysts' forecasts and smaller than the revised $13 billion shortfall for the March quarter.
Even so, the deficit on goods and services in chain volume terms (adjusted for price changes) decreased $871 million, adding 0.3 percentage points to growth in the June quarter measure of gross domestic product (GDP), the ABS said. Economists had tipped a 0.6 percentage point spurt to growth.
'We've downgraded our forecast for second-quarter GDP growth to 0.6 per cent from 0.8 per cent," said Westpac senior economist Matthew Hassan. "However, we still expect annual growth to be 3.5 per cent."
"We're now less inclined to expect a downward revision to the first-quarter GDP growth, which originally printed at 1.3 per cent," said Mr Hassan.
Currently a consensus of analysts polled by Bloomberg forecast the economy to have expanded by 0.8 per cent in the second quarter and 3.7 per cent in the year to June. That result follows first-quarter growth of 1.3 per cent and 4.3 per cent in the year to March.
Economists at JP Morgan also pared back their expectation for second-quarter growth, following the release of the export data.
"The net exports of GDP component underwhelmed, contributing just 0.3 percentage points to GDP (we had expected a much larger contribution of 0.7 percentage points)," said JP Morgan economist Tom Kennedy.
"In accordance with this disappointment, and incorporating some upside from government spending, we have revised our GDP forecast from 0.8 per cent growth to 0.6 per cent growth," he said.
BusinessDay with AAP