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G’day, forex mates! If you’re wondering how Australia’s economy is doing recently, or maybe you just want to have a broad overview of Australia’s economy, then this Economic Snapshot is for you.

Note: Like my other Economic Snapshots, there are nifty tables at the bottom, so you can skip to those if you’re a forex trader who’s in a hurry. The bullet points provided highlight the underlying details and trends that give the numbers their proper context, however.


  • Australia’s Q2 GDP grew by 0.5% quarter-on-quarter, which is slower than Q1’s downwardly revised 1.0% rate of expansion (+1.1% originally).
  • This is the weakest quarter-on-quarter expansion in four quarters.
  • On a more upbeat note, GDP grew by 3.3% Year-on-year, which is faster than Q1’s 3.1% pace
  • This is the fastest year-on-year expansion since Q2 2012.
  • Moreover, this marks the fourth consecutive quarter of ever faster annual GDP growth.
  • The 15.5% surge in government investment (+0.7% previous) was the main driver for quarter-on-quarter GDP growth, with a positive contribution of 0.7%.
  • As for the other drivers, government spending increased by 1.9% (0.9% previous), adding 0.3% to GDP growth while consumer spending increased by 0.4% (0.7% previous), adding 0.2% to GDP growth.
  • Basically, the Australian economy was kept afloat by the government.
  • The main drag meanwhile, was the 12.4% slump in business investment, which subtracted 0.8% from GDP growth.
  • Net trade was also a drag, subtracting 0.2% from total GDP growth, due to imports increasing faster than exports (2.7% imports vs. 1.7% exports).
  • As for annual GDP growth, the main reason for the pickup was the larger increase in government spending (4.4% vs. 3.7%), government investment (13.9% vs. 0.4% previous), private residential investment (8.3% vs. 7.0% previous), and exports (9.6% vs. 6.6% previous).
  • The large 26.3% slump in business investment (-19.6% previous), meanwhile, was the main drag.


  • Australia’s seasonally-adjusted jobless ticked lower from 5.8% to to 5.7% in July.
  • The downtick appears healthy since the number of unemployed people fell by 5.5K to 725.5K while the labor force participation rate edged ever so slightly higher from 64.86% to 64.88%.
  • Australia saw a net increase 26.2K, but the details aren’t all that great because the net increase was due to the 71.6K increase in part-time jobs more than offsetting the 45.4K decrease in full-time jobs.
  • This is the largest loss of full-time jobs in 33 months.
  • Part-time jobs generally don’t pay as well as full-time jobs, so the increase in part-time jobs and the large decrease in full-time job growth aren’t really all that great.
  • The seasonally-adjusted monthly hours worked slightly increased by 0.22% to 1,660.9 million hours after a modest 0.25% fall previously.
  • This will hopefully translate to higher earnings and productivity down the road.


  • For reference, the RBA’s target range for annual headline inflation is 1-2%.
    Q2 2016 headline CPI recovered, increasing by 0.4% quarter-on-quarter after sliding by 0.2% in Q1.
  • The recovery ends four consecutive quarters of deteriorating headline CPI readings.
  • Year-on-year, CPI grew by 1.0%, which is slower than the previous quarter’s 1.3%.
  • The annual headline reading is exactly within the lower bound of the RBA’s inflation target.
  • It also marks the second straight quarter of slowing annual headline inflation.
  • Not only that, it’s the weakest reading since Q2 1999.
  • Meanwhile, the annual core reading slowed further to 1.57%.
  • This marks the second quarter of worsening annual core inflation readings.
  • This is the lowest annual core reading ever since Q2 1999’s record low of 0.87%.
  • On a quarter-on-quarter basis, only 3 out of the 11 sub-components got hit, with the rest printing increases.

Business Conditions & Sentiment

  • The National Australia Bank’s (NAB) business confidence index eased from 5 to 4 index points in July.
  • Business sentiment has been positive since September 2013.
  • Commentary from the report noted that the slide in business optimism was due to a number of factors, such as the Federal elections and Brexit.
  • The NAB business conditions index also deteriorated, falling from a multi-year high of 11 index points to 8 points.
  • The drop was due to deteriorating business conditions in half of all industries, with the mining and wholesale industries being particularly hit hard.
  • Still, business conditions in all industries remained in positive territory.
  • The NAB labour costs index showed that wage growth moderated in July, growing by 0.7% quarter-on-quarter, down from June’s quarterly rate of 0.9%.
  • Overall, NAB concluded that its survey still “continues to show a steady recovery in non-mining activity, with the services sectors clearly leading the way.”
  • However, NAB also added that “longer term risks are becoming increasingly apparent, particularly going into 2018 as resource exports start to level off and dwelling construction turns negative.”
  • After 13 straight months of expansions, the Australian Industry Group’s (AIG) performance of manufacturing index (PMI) suddenly plunged below the 50.0 stagnation level by coming in at a 14-month low of 46.9 in August.
  • Some survey respondents pointed to “lower ordering activity and exports for the month” while others pointed to dampened activity, thanks to “reductions in government spending.”
  • AIG’s performance of services index (PSI) also suffered a lot, diving from the 11-month high of 53.9 to a 21-month low of 45.0.
  • Survey respondents “suggested the usual winter lull may have been deeper and longer this year, with no major events, product launches or announcements to bolster confidence and consumption.”
  • AIG’s performance of construction index (PCI) also slumped from 51.6 to five-month low of 46.6 in August.
  • survey respondents blamed the lower reading to “on-going pressures from a highly competitive pricing environment and tight margins.”
  • Moving on, business loans in July grew at a slower pace, increasing only by 6.2% year-on-year (+6.5% previous).
  • Business loans have been increasing at a weaker rate for the third consecutive month now.
    Still, business credit, at least on an annual basis, has been growing since September 2011.
  • Like the monthly reading, however, the annual reading also showed a slowdown since it only increased by 7.1% after printing a seven-year high of 7.4% back in April.
  • On a more upbeat note, business credit recovered by 0.3% after contracting by 0.2% back in June.

Consumer Sentiment & Housing

  • On a monthly basis, retail trade turnover stagnated in July, growing by (+0.1% previous).
  • Meanwhile, the year-on-year reading printed a weaker 2.7% increase (3.1% previous).
  • There’s no discernible trend for the monthly reading, but the annual reading has been growing at a slower pace for six straight months
  • The year-on-year reading also happens to be a 34-month low.
  • On both an annual and monthly basis, personal credit has been contracting for seven straight months as of July
  • On a monthly basis, it contracted by 0.1% in July, which is the same pace as last time.
  • On an annual basis, it contracted by 0.8%, which is also the same pace as the previous month.
  • Housing loans to owner-occupiers continue to grow at a steady 0.5% month-on-month.
  • Year-on-year, it moderated a bit, but it still grew at a solid 7.6% pace.
  • As for housing loans to investors, they grew by 0.4% month-on-month, the same pace as the last two months.
  • On an annual basis housing loans to investors grew by 4.8%, which is slower than the previous month’s 5.0%.
  • The current annual reading is the slowest pace of growth since July 2012.
  • Housing loans to investors have been steadily moderating from an annual high of 1.0% back in May 2015, which means that speculative pressure on the Australian housing market continues to ease, reducing the chance of a housing bubble.
  • Overall housing credit continued to ease, increasing only 6.6% year-on-year, a downtick from the previous month’s 6.7%.


  • Australia seasonally-adjusted trade deficit narrowed to around $2,410 million in July.
  • That’s in Aussie dollars, by the way.
  • Also, Australia hasn’t seen a seasonally-adjusted trade surplus since March 2014.
  • The narrower trade deficit was mainly due to exports increasing by 2.8% to a 10-month high of $26,425 million.
  • It also helped that imports contracted slightly by 0.4% to $28,835 million, ending two consecutive months of increasing imports.

Australia's Economy: Growth

Australia's Economy: Employment

Australia's Economy: Inflation

Australia's Economy: Business Conditions & Sentiment

Australia's Economy: Consumer Sentiment & Housing

Australia's Economy: Trade

Putting it all together

Overall, Australia seems to be in poor shape. For one, inflation is scraping the bottom of the RBA’s target range. Another is the largest loss of full-time jobs in three years during the month of July. Admittedly, however, other components of the jobs report were somewhat neutral or even positive.

And while Q2 GDP continues to grow faster on an annual basis, that was partially due to the surge in government spending and investment. Also, the quarter-on-quarter reading for Q2 GDP moderated a bit, but if we exclude government investment and government spending, then Australia’s economy would have contracted by 0.5% on a quarterly basis, which is not a very good sign for the private sector.

Looking forward, Q3 appears to be starting on a weak foot, since business conditions and sentiment deteriorated. Also, personal credit continued to contract on both an annual and monthly basis while retails sales turnover disappointed in July, the first Q3 month. About the only silver lining was the narrower trade deficit in July.

Moreover, government spending and sentiment may no longer save Australia’s economy from tanking in the future, given the recent talks about budget repair in order to mitigate the awful projection that the Australian government would be in deficit until 2021.