The Australian economy grew just 0.5 per cent in the second quarter as annual GDP growth slowed to 1.4 per cent, its slowest pace since 2009.
The public sector appears to be holding up the economy, contributing 1.3 percentage points to the 1.4 per cent growth over the past year. Private sector demand was flat in the quarter and down 0.4 per cent over the past year.
ANZ senior economist Felicity Emmett said the second quarter of 2019 is likely to be the low point in the cycle, with stimulus in the form of tax cuts and rate cuts helping to support stronger outcomes in the second half.
“The reality is, however, that the underlying momentum in the economy remains very soft, and further support from monetary policy is likely to be required in time,” she said.
“The slowdown in the economy has been remarkable: this time last year the economy was growing well above trend at 3.3 per cent, now annual growth has more than halved to 1.4 per cent."
Ms Emmett said the result will be a disappointment for the RBA, which had forecast 1.7 per cent annual growth for the quarter just a month ago, and suggested that another round of growth downgrades is likely in the Bank’s November Statement on Monetary Policy.
“The report shows that weakness in the economy has become more broad based, with the supports to growth more narrow,” the economist said.
While the public sector continues to be the key driver of growth, overall private sector demand was flat in the quarter, with both housing construction (−4.4 per cent q/q) and business investment (−0.4 per cent) falling.
“The household sector as well remains under pressure, with weak income growth and the earlier fall in house prices weighing on consumer spending (+0.4 per cent q/q),” Ms Emmett concluded.