Josh Frydenberg spins Australia’s GDP shocker


Westpac senior economist, Andrew Hanlan, has responded to today’s GDP shocker with the below sombre (but accurate) analysis:

The economy lost considerable momentum from mid-2018, led by the turning down of the housing sector and by the consumer. These are challenging times. The Australian economy is navigating a period of cyclical weakness, centred on construction – particularly housing – after a tightening of lending standards. There are powerful structural headwinds from weak wages growth and productivity, constraining consumer spending. The global economy is slowing and downside risks have intensified as the global trade and technology war escalates, denting business confidence and business investment plans. Looking ahead, recent tax cuts and interest rate cuts will provide a boost to activity. But given the weak starting point and the powerful headwinds, the risk is that growth remains below trend over the remainder of 2019 and through 2020. Currently, growth is lopsided, with a stark divide brisk government spending in the form of public demand and weakness in private demand which fell by 0.04 on quarter and 0.4 per cent on year – the weakest result since the GFC. These results therefore further strengthen the case for a rate cut in the very near term.

But Treasurer Josh Frydenberg is having none of it:

It’s a reminder of the remarkable resilience of the Australian economy and a repudiation of all those who have sought totalk it down.
The fundamentals of the Australian economy are strong. We are having a discussion with key stakeholders about other ways we can boost investment, and those decisions will be decisions at budget time.

The fundamentals are anything but “strong”. The economy is on public sector life support. Dwelling construction is crashing. Infrastructure investment is topping out. The labour market is turning for the worse. Wages are stillborn. And commodity prices look to have peaked.


Don’t expect much, if any, improvement into 2020.

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.