Growth 0.9pc in Q2
Many households will be nervously waiting to see when interest rates might stop rising.
The Australian National Accounts figures relate to the period from April to June, so in that context they are 'old news', but nevertheless worth a quick look.
We started the week with Westpac and others forecasting a bullish 2 per cent growth in the second quarter.
As it turned out, the indicators and partials reported early in the week were much softer than expected and growth came in at 0.9 per cent for the June quarter.
The growth was driven by a jump in exports as the international borders reopened, and household spending (especially travel), with everything else soft of negative.
Travel and transportation services recorded their best quarter since the Sydney Olympics in 2000.
It was interesting to note that with population growth now picking up sharply, GDP growth per capita in the quarter was only 0.5 per cent.
With revisions to net exports GDP growth over the year was considerably softer than previously expected, at 3.6 per cent (and GDP growth per capita was 2.7 per cent).
GDP per capita growth appears to be just about back on its pre-COVID trend now.
It was interesting to note that construction activity in the residential space was already falling away quite sharply in Q2.
Ostensibly this was largely due to weather disruptions and constraints on access to materials, but from what I hear a lot of projects just aren't being commenced now (and in any case construction insolvencies are at the highest level in 7 years).
Households squeezed
From a household perspective, we got the first meaningful increase in mortgage interest payable flowing through in Q2.
This is an interesting data series - it's not population adjusted, and it may be impacted by the huge growth in popularity of offset accounts.
The inverse of this jump was that the household saving ratio has tumbled all the way back down to pre-COVID levels at 8.7 per cent, from a pandemic high of 23.7 per cent.
Consumer sentiment has also declined to the lowest levels since the global financial crisis, suggesting that consumption will almost certainly drop away from here.
Australia's terms of trade hit a record high in Q2, with LNG and particularly coal prices trading at extraordinarily high levels.
Nominal GDP growth has thus been tremendously strong, rising 12 per cent over the year.
The early signs are, however, that commodity prices will be lower in Q3, with Australia's index of commodity prices dropping by 7.7 per cent in July on a monthly average basis.
Overnight the crude oil price has dropped below $85 for the first time since January, and Brent is down to $81 from nearly $123 in January, for a drop of more than a third.
Economist Paul Krugman has gone to some lengths to point out all the factors which are pointing to lower inflation ahead in the US, variously including plunging gasoline prices, the welcome and overdue fall in world food prices, and a major decline in price measures in the ISM manufacturing gauge.
I think everyone agrees that inflation was calm down eventually, the question is how quickly, and at what cost?
The wrap
Overall, the growth in the Aussie economy was softer than previously had been expected, particularly in per capita terms.
The National Accounts did show a continuation of the upwards pressures on labour costs, as expected, but the cavalry is now at least on the way in the shape of an immigration rebound.
In the short term, it looks like the economy will continue to grapple with capacity constraints for a while yet, with job vacancies still running at very high levels.
But looking further ahead, the rate hikes delivered to date have killed consumer sentiment stone dead, and commodity prices look set to right themselves in time.
