Australia's economic scorecard is out. GDP growth has plummeted to 0.3% in the March quarter compared to 1.1% last quarter, leaving economic annual growth at a lackluster 1.7%.
Economic growth slowing by one third in past year adds to the pressure piling on the government's Budget economic forecasts especially as it's counting on growth to lead to a wages boom that it hopes will drive up personal taxation receipts and help the nation reduce its annual deficit and in time enable the country to start paying down on its ballooning government debt.
Nevertheless the GDP results were in line with consensus expectations, it beat revised predictions of a negative quarter (especially after the previous day's disappointing current account numbers). But only just.
Even the Reserve Bank expected it when it kept the official cash rate steady at 1.5% after yesterday's board meeting. The RBA said: "Year-ended GDP growth is expected to have slowed in the March quarter, reflecting the quarter-to-quarter variation in the growth figures. Looking forward, economic growth is still expected to increase gradually over the next couple of years to a little above 3 per cent."
The latest figures take the annual growth rate in Australia's economy to 1.72% in the year to the March quarter from 2.4% in the December 2016 quarter - slower than the Trump-led 2.0% growth rate in the US and the UK's 1.9% (using the same measure) but marginally stronger than the Eurozone's 1.70% and Japan's 1.6%.
As telegraphed by the current account data, net exports (exports minus imports) provided the biggest subtraction from growth (0.7 percentage points). Also telegraphed ahead of the National Accounts' release, inventories added most to first quarter GDP growth - adding 0.4 percentage points.
While household consumption added 0.3 percentage points to growth in the March quarter, this is half the 0.6 pp contribution recorded in the December 2016 quarter - perhaps reflecting sluggish income growth, and worse, negative real wages.
This development hasn't gone unnoticed by the RBA. In its June policy statement, the RBA noted: "Wage growth remains low and this is likely to continue for a while yet ... Slow growth in real wages is restraining growth in household consumption."
Still, the RBA remains confident that economic growth will "increase gradually over the next couple of years to a little above 3 per cent."
If not, the slowdown in dwelling investments in the March quarter - it detracted 0.3 percentage points from growth during the period - should give it wiggle room to lower interest rates if necessary.