Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn


RBA 'may delay rate hike' after GDP miss

AAP  |  05 Dec 2018Text size  Decrease  Increase  |  
Email to Friend

The chances of a Reserve Bank rate hike in 2019 are receding after falling house prices, tighter lending standards and resolutely sluggish wages contributed to weaker-than-expected 0.3 per cent economic growth in the last quarter.

GDP growth was well below the June quarter's 0.9 per cent and fell short of market consensus forecasts, which had predicted quarterly growth of 0.6 per cent and an annual improvement of 3.3 per cent.

Growth in the 12 months to September slowed to 2.8 per cent, according to data released Wednesday by the Australian Bureau of Statistics.

Economists said annual growth for 2018 was now likely to miss the RBA's 3.5 per cent forecast - possibly coming in below 3.0 per cent - forcing the central bank to delay any hike for fear of further crimping consumption due to increased living costs.

Westpac chief economist Bill Evans said the RBA was now likely to revise its growth forecasts, and could keep the cash rate at its current record low through another two full calendar years.

The RBA this week kept the cash rate at 1.5 per cent hold for a 28th straight month.

"If we are right that the bank will revise down its growth forecasts on the basis of this result, then lower expected growth momentum going into 2020 may also temper the bank's attitude to rates in 2020 as well," he said.

Investing Compass
Listen to Morningstar Australia's Investing Compass podcast
Take a deep dive into investing concepts, with practical explanations to help you invest confidently.
Investing Compass

Household disposable incomes dipped 0.1 per cent in real terms over the quarter, and have not grown at all in 2018.

The Australian dollar shed more than half a US cent on the announcement, briefly dropping below 73 US cents before steadying at 73.15 by 1pm Sydney time.

Household final consumption expenditure increased 0.3 per cent during the quarter, contributing 0.2 percentage points to GDP growth.

"This suggests that faced with headwinds from weak wage and income growth and more recently falling asset prices, households are having to rein in increases in spending," Sarah Hunter, chief Australia economist for BIS Oxford Economics, said.

The slight increase in household consumption was driven by spending on food, insurance and other financial services, transport services and health.

But spending on durable goods such as cars, furnishings and household equipment, and clothing and footwear fell, while the household saving ratio fell.

Home prices in Sydney - the country's largest housing market - have fallen 9.5 per cent since their peak last year and are on course for their biggest ever decline.

Melbourne is following suit, leaving consumers tightening belts as they feel less wealthy or are unable to respond to rising repayments by offloading properties.

New home building activity declined in 0.8 per cent in the quarter following gains of 3.5 and 3.0 in the previous periods.

Elsewhere, net exports contributed 0.3 percentage points on a decline in imports, drought-hit farm output declined 1.0 per cent over the quarter and 8.1 per cent annually, and business investment fell 1.9 per cent since the June quarter.


provides Morningstar with market news.

AAP logo

© 2022 Australian Associated Press Pty Limited (AAP) or its Licensors. This is the Morningstar service with content provided by AAP where indicated. AAP reserves all rights, including copyright, in services provided by it. The information in the service is for personal use only, does not constitute financial product advice (whether general or personal) and may not be re-written, copied, re-sold or re-distributed, framed, linked or otherwise used whether for compensation of any kind or not, without the prior written permission of AAP. You should seek advice from a professional financial adviser before making decision to acquire or dispose of a financial product.

This service is published for general information purposes only without assuming a duty of care. AAP is not in the business of providing financial product advice (whether personal or general advice), and gives no warranty, guarantee or other representation about the accuracy of the information or images contained in this service. AAP is not liable for errors, omissions in, delays or interruptions to or cessation of the services through negligence or otherwise. The globe symbol and "AAP" are registered trademarks.

Email To Friend