The Aus GDP data is out.

Overall, it is just a little too backward looking, at the moment, given rate hikes, and sectorally uneven global growth dynamics.

Still, QoQ GDP is the weakest in a while.

I remain pretty sure the domestic demand picture moving forward is not a robust one (noting that is what kept us out of recession in this current period).

You can see how non experts (as in, a fully fledged academic) get confused by what drives what, what causes what. Wages and productivity are linked. Real rates and productivity are linked. Productivity is weak, raise the rates to moderate these unproductive use cases.

Before you know it, you are lost in a sea of accounting identities.

Still, I would take it as “productivity is poor, we are putting all our money into housing again, the RBA will keep rates tighter until productivity lifts and housing demand falls”.

That’s reflected in the assumption for rates, near term, with a peak sometime in October.

Remember that policy operates with a lag. Thus, all the weakness we are seeing in credit demand, building approvals, retail (depending mightily on who you are looking at), reflects rates from as much as a year ago.

So, recent tightening will weigh on activity ahead.

For that reason, we remain defensively positioned within our direct Australian share exposures. Maybe things will be fine, in which case we will do okay, but likely less than the benchmark. We are comfortable with that.

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