Australia economy hits dry spell as incomes fail to flow
Australian businesses reported only meager growth in profits and wages for the fourth quarter of last year, a dry spell for incomes that likely saw the whole economy struggle to expand, Trend reports referring to Reuters.
A range of data out on Monday also showed home building was heading for a deep hole after years of outperformance, while job ads suffered their biggest annual drop in five years.
The signs were of an economy that has clearly lost traction in recent months and may have grown only marginally in the December quarter, figures for which are due Wednesday.
Analysts suspect gross domestic product (GDP) expanded by a pedestrian 0.4 percent in the December quarter, with weakness in wages and house prices curbing consumption.
Annual growth is seen slowing to around 2.6 percent, from 2.8 percent, challenging the Reserve Bank of Australia’s (RBA) optimism for a pick up to 3 percent this year.
The central bank, which holds its March policy meeting on Tuesday, recently warned that a further significant fall in home prices could undermine household wealth and spending, and perhaps warrant a cut in interest rates.
Falling prices combined with tighter bank lending have also sent a chill across the construction industry with approvals to build new homes down 29 percent in February from a year earlier.
While Monday’s figures from the Australian Bureau of Statistics showed approvals bounced 2.5 percent from January, that followed two months of very sharp falls.
“The update pares back some of the concerning weakness that was emerging through the back end of 2018, particularly around non high-rise activity,” said Westpac economist Matthew Hassan.
“However, the through the year numbers are clearly still very weak and dwelling construction will continue to detract materially from growth in 2019.”