FXStreet (Bali) – According to Deutsche Bank, today’s Australian GDP data should have no impact on the RBA policy stance, which looks set to remain on hold for some time, the bank notes.
Key Quotes
“Given the volatility often evident in GDP growth in Australia (both at a headline level and also across the detail), we are inclined to average Q1 and Q2 growth.”
“Doing so sees annualized growth over the first half of 2015 at around 2%. That is below what we had expected – and only deepens the conundrum between labour market performance and GDP growth.”
“Nonetheless it appears, on the basis of the labour market’s performance this year (and also given the on-going resilience in our labour market tracker), that 2% (maybe 2%) GDP growth could well be sufficient to hold the unemployment rate constant. Squaring that requires a step down in productivity growth.”
“Here the accounts show GDP per hour worked flat in Q2 after a fall of 0.7% in Q1 to be just 0.3% higher over the year.”
“In the market sector things appear a little better, with value add per hour worked up 0.5% in Q2, although only 1.1% higher over the year.”
“That relatively weak productivity performance explains, in part in our view, weak wages growth. Here the accounts show average compensation per employee up just 0.2% in the quarter to be just 0.5% higher over the year.”
“That leaves the economy in a low productivity, low GDP growth, weak wages growth ‘trap’. Whether or not this ‘trap’ has to become a ‘new normal’ is ultimately, in our view, a matter of choice.”
“Indeed, as far as our monetary policy outlook is concerned, we see today’s GDP data as having no impact on our view that the RBA is on hold for some time.”
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