Aus macro/GDP

The numbers are out, and they aren’t great.

QoQ real GDP (top left) at 0.13%, and below consensus.

The matching commentary was similarly subdued (see below, yellow highlights). And yet the RBA is warming up the vocal cords (jawboning) and readying the trigger finger!

Domestic final demand, shown below, is the key. Australia’s imports and exports move around, final demand is a good way to dial back some of the noise in the accounts. And growth there is modest also.

Note the rate sensitive sectors (where we desperately need more building/spending/expenditure/capex, not less!) are rolling over. GFCF dwellings is a disaster.

The investment implications are, we think, reasonably straightforward. GDP data do not scream a pressing need for further hikes. Rates, at the level that they are, unfortunately, are depressing the one sector we need to be firing (building).

The consumer strength has been present, however given a) downgrades from consumer stocks and b)  noted lags in how long it takes for prior policy moves to kick in (i.e., as hikes from months past work their way through the system) that strength should not be extrapolated forward.

We continue to see better opportunities elsewhere (international equities, for example) relative to  domestic equities, and within domestic equities, continue to preference those that are either defensive in nature (telecos, healthcare, insurance) or relatively insensitive to domestic conditions (select energy and material stocks).

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