The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Wednesday, December 7, 2011

ANZ's take on GDP

From ANZ:


**The Australian economy grew by 1.0%q/q, pleasantly surprising ANZ and market forecasts. The result is on par with the last RBA forecasts (Nov SoMP), which implied growth to average at least 1% per quarter in H2 to meet its forecasts.

**Q2 GDP growth was also revised up to 1.4% q/q (1.2% previously). This takes annual growth to 2.5%, from (an upwardly revised) 1.9% in Q2.

**Growth is being underpinned by very strong income growth (mainly profits) and investment growth. Real gross domestic income rose 1.2% q/q and 3.0% y/y, underpinned by the record terms of trade. Corporate profits continue to drive this income growth, rising 5.7% q/q and 10.7% y/y.

**The expected investment boom is unfolding, with private sector business investment up 12.9% q/q and 22.7%y/y, reflecting non-residential construction growth of 24.4% q/q and 32.7% y/y. Indeed, this sector was the dominant driver of growth in this quarter, with non-dwelling construction contributing 1.5% ppts to growth and machinery and equipment contributing another 0.4 ppts. This investment contributed also to the drag from net exports (-0.6ppts), due to the high levels of capital equipment currently being imported. This investment activity will take over as the predominant driver of growth over 2012, with little indication that large mining investment plans currently in train are being disrupted by global events.

**Growth is becoming more divergent by sector and across states as expected, reflecting the new drivers of growth. Strong growth in WA (+8.4% q/q and 16.4% y/y) and Queensland (+3.5% q/q and 9.3% y/y) offset weaker activity in NSW (+0.5% q/q) and a contraction in Victoria (-0.1%q/q). By industry, strong performances in mining, construction, wholesale trade and hospitality offset a contraction in activity in agriculture, utilities, transport, real estate services and financial services (unusually we saw six sectors recording quite large negative quarters this quarter). Production growth was relatively weaker than incomes growth, at 0.9%q/q

**As we saw in Q2, Australian households are not quite as cautious in their spending as the monthly retail survey would indicate. Total household consumption grew 1.2%q/q in Q3 and contributed 0.7 ppts to growth. At the same time, the household savings ratio edged up over 10% again after falling to 9.1% in Q2. However, retail trade was softer at just 0.6% q/q and 1.4% y/y suggesting a continuing switch to spending on services.

**Employment growth was flat in the quarter - this is important as even with stronger than expected GDP growth, there was no significant employment growth (the Bank's main aim from here should be to keep unemployment low around 5-5.25%, while inflation remains within target)

**Exports rebounded +2%, in part reflecting recovery of coal exports (still more to come on this front).