The AUD rallied straight after the GDP result this morning and now sits at 1.0729, equally 3 year swap rates have risen 5 bps post number also suggesting that for currency and interest rate traders at least the GDP was not as weak as they had feared even if market economists got pretty close:
Indeed the -1.2% result was poor as the chart above shows in the context of the past decade. But equally as you can see in the chart below it really was net exports that was the huge drag on growth this quarter, with some adverse consequences from the inventory accumulation noted the other day.
Pundits will be saying that this fall will be washed out over the next few quarters in line with what the RBA has suggested to us. there are no downside surprises in this data so the medium term view of the RBA is likely therefore to remain a tightening bias. July or August looks on the table for a rate rise.
The National Accounts are a treasure trove of data and we’ll be pulling stuff out for weeks. But today, the thing that I’m focussed on quite closely is housing, households and the savings rate. Our focus on this is driven by the RBA’s belief that this is a transitory response to the GFC not a structural response to debt. I hold the latter view. The chart below shows that savings are back up at their highs:
