Australia | May 28 2010
By Chris Shaw
Australian GDP numbers for the March quarter are due next week and leading into the result Westpac has updated its view on the health of the economy.
The bank's senior economist Alan Hanlan expects GDP growth for the period of 0.4%, which equates to annual growth of 2.3%. This implies a temporary slowing in growth, as the December quarter of last year delivered GDP growth of 0.9%.
A major swing factor in the growth outcome, in Hanlan's view, is business investment, which was strong in the December quarter thanks to some tax breaks but has dipped in the March quarter. Westpac expects an upswing to gain momentum in coming quarters.
Driving the growth in the March quarter, in Hanlan's opinion, will be an increase in building work in the public sector, which has been strong enough to offset subdued household sector spending. This sector has been impacted by rising interest rates.
The outlook remains relatively upbeat according to Hanlan, as year ahead he expects domestic demand growth of around 4.0% and GDP growth of about 3.5%. The key growth engine will be the construction sector given an expected upswing in not only public building but in housing and mining infrastructure projects as well.
Hanlan expects international conditions will also be supportive, with the terms of trade likely to be up by as much as 20% this year. This should provide a sizable boost to national income, one that would offset the headwind of current events in Europe.