Australian Q4 GDP preview

By Andrew Hanlan Senior Economist, Westpac

Mixed conditions to end 2022, ahead of sharp slowdown in 2023. Q4 GDP forecast: 0.7%qtr, 2.7%yr.

Read full report 'Australian Q4 GDP preview'  (PDF 79KB)

 

The Australian National Accounts, to be released on Wednesday March 1, will provide an estimate of economic activity over the final three months of 2022, as we head into 2023.

 

As we’ve highlighted previously, the Australian economy was in transition over the second half of 2022. 

 

The boost from earlier substantial policy stimulus was still evident, but waning, and household service sectors benefited from the ongoing normalisation of life after the many and prolonged covid restrictions. However, some adverse impacts of sharply higher inflation and rapid interest rate rises became apparent (falling retail sales, declining home renovations and lower housing turnover). The full effects of these negative dynamics will be evident in 2023, triggering a sharp economic slowdown.

 

We expect output growth of 0.7% for the quarter (following a 0.6% outcome for Q3). Annual growth moderates to 2.7%, down from 5.9% - a figure flattered by weak base effects associated with the delta lockdowns in Q3 2021.

 

The arithmetic of our 0.7% forecast for Q4 is: +0.3% for domestic demand and a net +0.4ppts impact from net exports (+1.4ppts) and inventories (-1.0ppts).

 

If domestic demand growth prints a 0.3%, that will be the softest outcome since September 2021 (the delta lockdowns) and the softest outcome outside of a lockdown period since March 2019.

 

We anticipate that: overall consumer spending grew by a solid 0.8% (centred on services); home building was broadly flat (impacted by an unfolding pull-back in renovation work); business investment slipped a little, down a forecast -0.5%; and public demand is consolidating at a high level, edging up by 0.3%.

 

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