The health of the Australian economy returns to the fore this week with the final meeting for 2019 of the Reserve Bank’s monetary policy board tomorrow and the September quarter’s National Accounts the day after which are forecast to show another miserable growth outcome.
And with Federal Parliament meeting this week for the last time this year, the expected slowing in GDP in Wednesday’s national accounts will provide an unwelcome reminder for all those in the national capital that the sluggish pace of activity remains the biggest challenge going into 2020 and the start of the third decade of the 21st century.
There’s also a slew of other data on house prices, wages, and salaries, inventories in the September quarter, current account figures for the same quarter, as well as government finance figures. There’s also manufacturing activity for November, car sales, building approvals, retail sales and a trade account update for October.
Despite Governor Phil Lowe making it clear in a speech last week that there is no way interest rates are going to be cut any time soon by the central bank, despite the urgers among market economists and business media commentators claiming that quantitative easing and cheaper money is on the way in 2020.
Dr Lowe made it clear in his speech that he doesn’t see negative rates or a bond-buying spree happening next year and expects the RBA will wait to see how economic activity reacts to the three rate cuts so far this year.
The AMP’s chief economist, Dr. Shane Oliver says that “we now expect the next 0.25% rate cut to come in February and with growth likely to remain weaker than the RBA expects we see a final cut to 0.25% in March.
“Beyond which QE is likely, but the RBA will likely delay it until it sees whether it gets any substantial further fiscal easing in the May Budget,” Dr. Oliver wrote at the weekend.
Dr Oliver sees September quarter GDP growth of 0.6% quarter on quarter or 1.7% year on year, “with net exports, public spending and inventories being the main drivers offsetting continued softness in consumer spending, housing investment and business investment,” according to Dr. Oliver.
The NAB though is gloomier – in its national accounts update on Friday, its economics team wrote: “Wednesday’s GDP figures are forecast to show a small slowing in growth from last quarter, with growth printing at 0.3% quarter on quarter and annual growth slowing to 1.5% year on year.”
“Overall, we see a similar pattern of growth to previous quarters, with weakness in private sector demand partially offset by a rise in next exports and a lift in public spending,” the NAB wrote.
Other data this week includes November’s house price data with another solid rise expected later today of around 1.5% according to a forecast from Dr. Oliver.
A fall in building October building approvals later today, and retail sales on Thursday which are forecast to show a small rise of 0.2% after September’s shock weak outcome. The car sales figures from the industry later in the week will show another fall in October. Trade data for October will also be released on Thursday.
The sluggish economy was underlined on Friday with yet another weak month of lending in October, according to RBA numbers.
The RBA data shows private credit growth slowed further in October to its slowest rate since 2010 with an annual rate of 2.5%.
Annual growth in housing credit slowed to a record low of 3%. Business lending grew at an annual rate of 2.7% in October, the lowest annual rate since April 2014.
The AMP’s Dr Oliver says “monthly data looks to be stabilising suggesting that a pick-up in new loans may be starting to offset the rapid pay down of existing housing debt.
“But with total housing credit growth remaining soft at 3%yoy it’s far from being a concern for the RBA from a financial stability perspective, so the housing market upswing is not yet a constraint on further RBA monetary easing,” he wrote at the weekend.