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StatSnack: growth data shrinks

"It will be difficult to achieve the desired rebalancing of growth towards non-mining without a recovery in consumer spending."
ANZ Research

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Source: ABS, ANZ Research.

Last week the Australian Bureau of Statistics released its annual national accounts data. While all economic data is old, these numbers are really old - although the data did offer a more accurate picture of 2013-14 from which forecasts for the coming year can be based. 

While there were few changes to the pre-2011 data, disappointingly growth in the past year was revised down. 

For the 2013-14 year, the ABS now estimates gross domestic product grew just 2.5 per cent rather than the previously estimated 2.9 per cent. 

The primary driver of this markdown was a downward revision to household consumer spending which is now estimated to have risen just 2.2 per cent in the year rather than the previously reported 2.5 per cent. 

Net exports were also revised lower. While this is also disappointing, ANZ Research continues to expect further strong growth in export volumes over the next few years, driven by the expansion in mining capacity. 

The annual national accounts also gave us an update on non-mining investment. More disappointment. That fell 2.6 per cent in 2013-14. Our own analysis, however, suggests non-mining investment has bottomed in quarterly terms and turned up in recent quarters. 

With the building blocks in place for a moderate recovery in consumer spending and a pick-up in non-mining investment, ANZ Research continues to expect the non-mining recovery to strengthen over the coming year. 

That said, the recent weakness in consumer spending and non-mining investment is a concern and highlights the risks around the timing and strength of the recovery. 

Given spending accounts for around 55 per cent of GDP, it will be difficult to achieve the desired rebalancing of growth towards non-mining without a recovery in consumer spending. 

Moreover, without stronger consumer spending growth, any recovery in non-mining business investment will be short-lived.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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