Hello everyone.
Welcome to the Smart Market Insights here on Kalkine TV.
I’m James, and today we will be shining some light on Australia's Gross Domestic Product
Data for the first quarter.
The Australian GDP data for the March 2022 quarter exceeded all expectations, with the
latest report from the Australian Bureau of Statistics (ABS) showing that the economy
expanded 0.8 percent during the quarter.
In a highly unexpected turn of events, the Gross Domestic Product has surpassed even
the highest forecast presented by economists.
The first three months of 2022 marked the second consecutive quarter where the economy
grew after a contraction in the September 2021 quarter.
The higher-than-expected data has been a breath of fresh air for Australia at a time when
inflationary concerns are meddling with the country's post-pandemic recovery.
Rising prices of goods and services have affected Australians and residents of most advanced
nations.
The economy's annual growth rate stood at 3.3 percent in the March quarter, lower than
the annual inflation rate of 5.1 percent reported by the ABS.
Though higher prices have proved to be a boon for Australian exporters, subdued demand for
goods and services has fuelled fears of a recession.
Meanwhile, GDP data beyond expectations is pointing towards more aggressive interest
rate hikes by the Reserve Bank of Australia (RBA).
A key constituent of the observed rise in GDP is the rise in demand across several discretionary
categories.
Household and government spending led to the rise in GDP, with the total final consumption
contributing 1.4 percentage points to GDP.
As COVID-related restrictions eased, household spending on transport, hotels, cafes, and
restaurants also increased.
Recreational activities took centre stage as individuals were finally able to step out
of their homes.
The government put in efforts to ensure that the flood-affected areas of New South Wales
and Queensland receive the necessary relief measures.
Australia has witnessed many climate adversities in a relatively short period, including bush
fires and floods.
Moreover, the household saving ratio of 11.4 percent during the March quarter was the lowest
since the start of the pandemic but was above pre-pandemic levels.
This signifies that consumer demand took off during the period as many individuals dug
into their savings from the pandemic.
Australian businesses also profited from the higher prices of commodities and other consumer
goods.
As supply constraints plagued European nations, Australia's exports remained stable with only
a small decline.
Australia's terms of trade, which is the ratio of the price of goods exported to the price
of goods imported, reached a record high level in the March quarter.
Meanwhile, homebuilding remained lower paced in the second consecutive quarter.
This was majorly due to the lack of adequate skilled workers and a delay in the shipment
of raw materials, along with challenging weather conditions.
The removal of the Homebuilder grant also contributed to this slowdown.
The latest GDP figure is well beyond the expectations of the big four banks.
Essentially, this means the economy might be in for further monetary policy tightening,
with the RBA embracing more rate hikes in the coming months.
Like most other central banks, the RBA can also conduct a larger rate hike in subsequent
periods after its first-rate hike.
Fears loom that high-interest rates would remove some of the existing momentum away
from the economy.
Overall, this would be burdensome for mortgage holders, while it could help ease inflationary
pressures in the long run.
Well, that’s all for now.
We will be back again with the exclusive Smart Market Insights Show tomorrow.
Till then, keep watching Kalkine TV for the latest market updates and related insights.
I’m James, signing off