Australia’s economy grew by 0.1% q/q in Q1 2024, slower than the 0.3% q/q uptick in the previous quarter and the 0.2% q/q increase that the markets had expected.
Overall, there was subdued domestic demand as increased consumption expenditure was offset by a fall in total investment. The report also detailed that a build-up of inventories partly offset the increase in imports.
On an annual basis, GDP expanded by 1.1% against Q4’s upwardly revised 1.6% uptick and the expected 1.2% increase. The 1.1% growth marks the slowest annual increase since December 2020.
On a per capita basis, GDP shrank for a fifth consecutive quarter at -0.4% (-1.3% y/y).
Link to Australia’s GDP report
Reacting to the report, Australia’s Treasurer Jim Chalmers said:
“The primary cause of this very weak growth was higher interest rates, combined with moderating but persistent inflation and ongoing global uncertainty.”
“This [outcome] justifies the government’s approach to fighting inflation without smashing the economy, when growth was already soft and people were already under pressure.”
He said this growth was “below the median market expectation”, but welcomed “any growth” in light of the “domestic and global circumstances we confront.”
Market Reactions
Australian dollar vs. Major Currencies: 5-min
Overlay of AUD vs. Major Currencies Chart by TradingView
AUD traders mostly shrugged off Australia’s disappointing GDP read, probably due to the report’s lagging nature and Treasurer Chalmers pointing out that the results justify the RBA’s monetary policy direction and the government’s recent budget. A slightly improved risk environment also didn’t hurt.
The Australian dollar, which started gaining support at the start of the session, saw a fresh upswing at the report’s release before seeing minimal pullbacks across the board.
The Aussie remains in the green against its major counterparts, chalking up the most gains against safe havens like JPY and CHF while seeing limited increases against fellow comdolls like NZD and CAD.
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