Dollar dives as growth remains slow
The economy grew at a sluggish pace in the September quarter as consumers remained cautious about spending, with the weaker than expected data sending the Australian dollar plunging to a three-month low.
The economy grew a seasonally adjusted 0.6 per cent in the three months to September, after expanding by a revised 0.7 per cent in the second quarter, official figures showed. The annual growth rate fell to 2.3 per cent, from a revised 2.4 per cent in the second quarter.
"Today's numbers are a reminder of the tough trading conditions in the economy, particularly outside of the mining sector," Treasurer Joe Hockey said.
The Australian dollar, which was trading at US91.36¢ before the release, fell as low as US90.45¢ on Wednesday. It was buying US90.62¢ in late trade.
Economists had forecast GDP to grow by 0.7 per cent for the quarter and 2.6 per cent year-on-year. Some analysts had revised their expectations upwards after better than expected net exports data on Tuesday.
Growth in the third quarter was driven by the mining industry, which added 0.3 per cent to GDP. The construction, transport, postal and warehousing, financial, public administration and healthcare industries also each contributed 0.1 per cent to growth.
The latest figures showed households were continuing to save at near record high levels. The household saving ratio rose to 11.1 per cent for the third quarter, from 10.2 per cent.
In contrast, household spending rose only 0.4 per cent, taking the annual growth rate to 1.8 per cent for the year — far below the trend level of 3.5 per cent, analysts said.
"It means that you can't expect to see consumption as a major driver of growth in the economy," Citi's chief economist, Paul Brennan, said of the high savings rate.
"We really need to see housing continue to recover and we also need to see other areas like non-mining business investment picking up. The picture coming out of these national accounts today suggests that growth is only going to pick up slowly next year. Monetary policy is working, but there's a few headwinds, including the unwillingness of consumers to ease up on the level of their savings."
Economists said the disappointing third-quarter figures were unlikely to shift the Reserve Bank from its current stance, especially as the data was close to the central bank's own forecasts. Earlier this year, the RBA cut its growth expectations for this year to 2.25 per cent.
The central bank also revised down its growth forecasts for 2014 and 2015 on the back of what it expects to be a faster than expected fall-off in mining investment.
"We think that the bank would have been a little disappointed that there were not more signs of life outside the resources sector in [the third quarter], but the national accounts are unlikely to have changed its thinking too much," Barclays' chief economist Kieran Davies said.
"This is because partial indicators continue to head in the right direction and the world economy is still improving, with the global PMI at its highest level since 2011."
Mr Hockey said the pace of economic growth was not strong enough to generate jobs for all Australians.
"Combined with other economic data it is clear that the nominal growth forecasts in the [Pre-Election Economic and Fiscal Outlook] will not be reached," he said.
"This points towards a further deterioration in the budget bottom line."