Economy splutters
The economy skirted away from its so-termed 'per capita recession' in the June 2019 quarter in growing by +0.5 per cent.
The quarterly growth was driven by net exports (including weakness in imports) and public demand (government spending on healthcare initiatives) so it was all pretty lacklustre.
The quarterly growth was driven by net exports (including weakness in imports) and public demand (government spending on healthcare initiatives) so it was all pretty lacklustre.
Year-on-year growth in the economy has been just about flat when adjusted for population growth.
Nominal GDP has held up better, but while there's been a lift in profits - especially mining profits - household income growth has remained slow (not helped by taxation being too high).
Commodities delivered a nice boost to national income, then, but GDP growth not so much.
Rate cuts have now clearly begun to reduce the aggregate mortgage interest bill for households, and will continue to do so for the remainder of 2019, and into 2020.
Household savings rates remain low.
New home building contracted by 5.9 per cent in the quarter and 10.9 per cent year-on-year.
There was some welcome brighter news for Western Australia, where final demand lifted nicely.
New home building contracted by 5.9 per cent in the quarter and 10.9 per cent year-on-year.
There was some welcome brighter news for Western Australia, where final demand lifted nicely.
Domestic challenges
There's been a bit of spin to label this weakness in the Aussie economy as part of a global slowdown, but if anything the numbers suggest the opposite.
The terms of trade received another significant boost from iron ore and other commodity prices, and exports have raced to record highs.
Instead it looks rather more like a domestically engineered slowdown, with households and businesses relatively starved of credit through the Royal Commission and beyond, a couple of years of falling housing prices, flat or negative growth in retail turnover, and now double digit falls in new car sales continuing all the way into August.
Hopefully all of these metrics are turning - or have already turned - a corner.
Indeed, if activity follows the wealth effect back up as might be expected, with sentiment at multi-year lows this might be a good time to look at buying auto dealers and related services businesses counter-cyclically.
Indeed, if activity follows the wealth effect back up as might be expected, with sentiment at multi-year lows this might be a good time to look at buying auto dealers and related services businesses counter-cyclically.
Overall, the 2019 financial year was an underwhelming one for the economy.
Bill Evans of Westpac has forecast two further rate cuts to bring the cash rate to 0.50 per cent.
