The second quarter GDP data released this morning was broadly in line with expectations with a 0.9% q/q increase on the back of the previous quarter’s 0.7% increase (actually revised slightly down from +0.8%, but Q4 2021 was revised up) which leaves us 3.6% up from the same period a year ago. Over the course of the 2021/22 year GDP was up 3.9% having been up 1.6% in 2020/21.
This is still robust growth and well above the pre-COVID trend which was closer to 2.5% y/y. Clearly the interest rate rises we have been seeing in the past few months (and are likely to continue to see) will hamper this pace of growth in coming months; exactly as is intended to contain the inflationary pressures evident in the economy.
Certainly, this pace of growth will not be such as to stay the RBA’s hand in consideration of future rises.
The Household savings rate has continued its sharp decline and now sits at just 8.7% (down from a high of 23.7% in the second quarter of 2020 as the fiscal stimulus effects rippled through the household sector). Nevertheless, even at this level it remains well above the pre-COVID 5-year average of 5.7% and indicates that households still have sizeable buffers on the back of a very strong labour market.
The ABS provide us with quarterly data for State Final Demand, which is the domestic component of the state’s economy. The ABS Q2 data for Queensland has State Final Demand +1.0 q/q for a year-on-year increase of 4.0% (after some upward revision to the Q4 2021 data). This compares to Domestic Final Demand in Australia up 1.0% q/q, +4.7% y/y.
Queensland performed much better than the national average in the latter part of last year since the state did not have to endure the lock-downs seen in Victoria and NSW; however, growth appears to have now returned to a level more consistent with the national picture.
This quarter total Private Demand increased 1.0% q/q (after a slight revision upwards to the Q1 numbers) while Public Demand was up 0.7% q/q (after a revision down to Q1). The chart above shows that Private sector growth has returned to a level more consistent with the pre-COVID norm.
While household consumption remains quite robust (+2.2% q/q) we are still seeing a quite weak performance from Private sector CAPEX, which fell again, down 2.4% q/q for the third consecutive quarterly drop.
This final National result for 2021/22, at 3.9%, was somewhat higher than the Reserve Bank had projected as recently as their August Statement on Monetary Policy (forecast was 3.75%). This same document projected year-on-year growth this quarter at 3.5%, so again this result betters that forecast.
The SOMP sees a slight slowdown in 2022/23 to 3.5% and then much sharper declines through subsequent years to just 1.75% in 2023/24