From Westpac:
Q4 public demand, +1.4%
Public demand surprised to the high side on a jump in investment, +7.8%.
Overall public demand increased by 1.4% in the quarter, well in excess of our expectations (f/c 0.4%), and will add 0.3ppts to growth in the quarter.
The strong result was despite flat public consumption.
Public investment, which is volatile quarter to quarter, is trending higher as state governments spend more on transport projects.
Public consumption softened over the second half of 2016 in part, it would appear, due to a moderation in public sector jobs growth.
Implications for Q4 GDP
We have upgraded our Q4 GDP growth forecast to 0.9%qtr.
Annual GDP growth lifts to 2.1% from 1.8% in Q3.
Domestic demand expanded by 0.8% in Q4 we estimate, with gains in: housing, 1.3%; public demand, 1.4%; business investment, 0.3%; and consumer spending, +0.6% (which assumes a fall in the savings rate to fund increased spending).
Net exports add 0.2ppts, offsetting a 0.2ppts drag from inventories.
We expect the statistical discrepancy to add 0.1ppt to growth (this is because our estimate of GDP on an income basis is stronger than that for GDP on an expenditure basis, with income strength centred on a sharp jump in company profits).
The recession is off.
