Daily Commentary BY THE CURVE TEAM –

Data Highlights Growth Tailwind

4th of May, 2018

The latest domestic data released yesterday will provide a much needed shot in the arm for growth in the first quarter. If sustained over the months ahead, it will also help growth reach the updated forecasts we are likely to see in today’s Quarterly Statement on Monetary Policy from the RBA.

As trade wars continue to fester away offshore, Australia finds itself in an enviable position with another solid trade surplus reported for March. The trade surplus increase to $1.5bln in March with both January and February being revised higher to $1.16bln and $1.35bln respectively.

After contributing very little to growth over the past 18 months, even subtracting 0.5% from growth in Q4 last year, net exports is likely to post a positive contribution to growth for Q1 when it is released next month.

Also a positive for the outlook for growth is the fact that building approvals have stabilised over the last three months following a volatile end to 2017. While they are roughly 10% below the levels seen during the boom times in 2015 and 2016, they are still around 40% higher than the average level experienced during the 2000 to 2013 period.

These two components of growth are going to be needed to keep the economy chugging along as the consumer continues to face headwinds on multiple fronts.

We are likely to learn much more about the outlook for consumers, the broader economy and inflation later today when the RBA releases their quarterly Statement on Monetary Policy.

David Flanagan

Director - Interest Rate Markets