Australian Q1 GDP: a preview

By Pat Bustamante Senior Economist, Westpac

Domestic demand expected to have flatlined. Q1 GDP f/c: 0.3%qtr, 1.3%yr. Domestic demand: +0.1% and +0.2% over two qtrs. Hours worked estimated to be flat in Q1.

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The Australian National Accounts, to be released on Wednesday June 5, will provide a comprehensive update of economic activity over the first three months of the year including estimates of growth, consumer spending, productivity, and underlying cost pressures.

We expect the recent run of sub-par growth in economic activity continued in the March quarter, driven by weak consumer spending. Hours worked look to have been about flat in the quarter, also pointing to soft growth in economic activity.

We expect GDP expanded by 0.3% in Q1. This would see annual growth ease from 1.5% to 1.3%. These outcomes are well below annual population growth, which is around a brisk 2½%.

Importantly, the domestic demand impulse (spending by consumers, businesses, and governments) is expected to have flatlined, edging 0.1% higher for the second consecutive quarter. This would see the domestic demand impulse run at just 0.5% in six-month annualised terms, the slowest pace since 2014 outside of the pandemic.

Underlying our GDP forecast is a +0.1ppts contribution from domestic demand, net exports are expected to detract –0.3ppts, while total inventories should add +0.5ppts to growth (which largely reverses a –0.3ppts from inventories last period).

Domestic demand detail is expected to include: consumer spending +0.1%, housing –1.7%, business investment +0.5%, and new public demand +0.3%.

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Australian Q1 GDP: a preview

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