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Weekly Economic Commentary

Weekly Economic Commentary

Categories: General, Commodities

It may have been easy to conclude that things look pretty good here in Australia at the moment with the Reserve Bank leaving interest rates unchanged at record lows once again and our economic growth rising to levels not seen since March 2012. However, not all is what it seems and you only need to delve into the numbers to reveal the fragility of last week’s GDP data.

In fact, the March quarter GDP posted a surprising 1.1% rise to bring the annual pace of growth to 3.5%, up from 2.8% last quarter. Whilst this was well above market expectations, it was almost entirely driven by the mining sector. A breakdown of performance by industry reveals mining contributed 0.9% toward the 1.1%, representing a stunning 80% of the entire economy.

So, with the mining industry expected to slow dramatically, economists have already begun to discount the next quarter’s GDP forecasts and, more importantly, have discounted this latest stellar result.

What does this mean for financial markets? Well, rates are on hold for the foreseeable future, the Australian Dollar remains above 90 cents and the share market continues to drift higher.

Source: Rural Bank

 

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