Westpac still expects a growth slowdown in 2019 despite recent strong GDP report: Bill Evans

EXPERT OBSERVER

Following the strong GDP Report Westpac has lifted its growth forecasts for 2018 and also revised slightly its forecasts for 2019 and 2020.

However, the key themes that growth will slow in 2019 and remain below the 2018 pace in 2020 are intact.

The June quarter GDP report was released this week. Due to upward revisions of around 0.5 percentage points, the Australian economy was revealed to be much stronger than we had been led to believe.

Real GDP expanded by a solid 0.9% in the June quarter and annual growth printed 3.4% – well above potential of around 2.75%. Markets were expecting annual growth of around 2.8% with most of the lift being attributed to revisions of earlier quarters.

These accounts have prompted a review of our growth outlook.

We have lifted our growth forecast for 2018 from 2.7% to 3.3%.

The growth forecast for 2019 has been lifted from 2.5% to 2.7% and the 2020 forecast has increased from 2.8% to 3.0%.

While the levels of the growth forecasts have been lifted, the profile of an economy that will slow into 2019 and lift modestly in 2020 remains.

Furthermore, these growth rates (following 2.4% in 2017) are insufficient to make any meaningful impact on the spare capacity in the economy and therefore our inflation and wages forecasts remain essentially unchanged.]

Bill Evans is the Chief Economist for Westpac