Well, for all the whinging and whining! My old pal, Peter Switzer, do you hear me!? Today's GDP numbers show precisely why the RBA should have hiked in May, or if not May, in June. The more likely outcome is July. Here is Paul Bloxham's (HSBC) summary:
"If it weren’t for the headline GDP number being severely hit by a sharp fall in coal exports, today’s numbers would be universally judged as strong.
Domestic demand was strong, driven by rising consumption, solid growth in business investment and continued modest support from public demand. Overall domestic demand rose by 3.1% y-o-y, which is around trend and a good result for an economy affected by significant natural disasters during the quarter, including the Queensland floods and cyclone Yasi.
Despite the stories of weak retail sales, household consumption growth was a solid in Q1 and increased by a strong 3.4% over the year. Business investment rose due to continued strength in the mining sector – and there is lots more of this to come...
We know the RBA will also see things in these terms. In the quarterly official statement we were told that they will be watching domestic demand, not production indicators. And demand looks strong.
So there is nothing in today’s report that would suggest the RBA would back away from its current outlook for rising inflation or the need to lift rates ‘at some point’ to contain growing inflationary pressures."
