Australia: Onward and upward for growth - TDS

Australia’s Dec quarter GDP rose by +0.4%/q, marginally below +0.5%/q consensus and TD’s post-partial-data forecast of +0.6%/q, but the annual pace of 2.4%/y did not challenge the RBA view that growth would end 2017 at 2½%/y, according to Annette Beacher           , Chief Asia-Pacific Macro Strategist at TDS.

Key Quotes

“The AUD is being whipped around by USD news (Cohn resignation) and so GDP didn't move the needle this time. We remain more constructive on the AUD than consensus as the underlying economy remains solid and the cash rate won’t remain at 1.5% forever.”

“GDP expanded by 2.6% in 2016 and 2.3% for 2017, and our 2018 estimate is for a return to trend growth of 2.7%. The RBA yesterday said that "2018 growth will be stronger than 2017", and that remains the case.”

“The Board elected once again to keep the cash rate at 1.5%, repeating a statement similar to recent months, emphasising caution and patience. We see the Bank remaining on hold until November, timing that is marginally ahead of the Q1 2019 preferred by consensus.”

“After Jan retail sales yesterday (+0.1%/m) we turn to tomorrow’s Jan trade balance (TD +$A700m; mkt +$A200m). Our above-market forecast was shaped by the 13%/m slump in Chinese exports to Australia in the month. Chinese trade for Feb is also released tomorrow, updating our tracking for Feb trade balance.”