As was inevitable the Australian economy contracted by 7.0% q/q in the second quarter of the year (after a 0.3% q/q fall in Q1). This equates to a 6.3% year-on-year fall with the 2019/20 year showing a 0.2% decline after a 2.0% increase in 2018/19. Australia’s run of avoiding recessions is officially at an end.
The single largest contributor was a 12.1% q/q fall in household consumption which deducted 6.7 ppts; hardly surprising given that the household savings rate leapt to 19.8% (from 6.0% the previous quarter)! Increases from the Public sector, where Govt consumption added 0.6 ppts and Public CAPEX added 0.1 ppts, were nowhere near enough to offset the collapse in household spending and private Capex (which also deducted 1.2 ppts. Net exports added 1.1 ppts as a large decline in imports added 2.5 ppts.
In Queensland State Final Demand, which only measures the domestic side of the economy did better than the national average and fell 5.9% q/q and or minus 5.2% y/y. Across the nation Gross National Expenditure fell 8.0% q/q and was down 7.7% y/y. For 2019/20 the fall in GSP was 0.1% after a rise of 1.3% in 2018/19. We will have to wait until November to see the ABS estimate of Gross State Product for 2019/20 (in the meantime QLD Treasury released their estimate of GSP for Q1 a few days ago….see here for details…which showed a 0.3% q/q decline).