View of the Yarra River flowing through the center of Melbourne, Australia.
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Australia’s gross domestic product rose 2.3% year-on-year in the first quarter, slightly below analysts’ expectations.
Economists polled by Reuters had forecast 2.4%, compared with 2.7% in the fourth quarter of 2022. On a quarterly basis, GDP rose 0.2 percent, compared with expectations for a 0.3 percent increase in a Reuters poll.
Katherine Keenan, Director of National Accounts Australian Bureau of Statisticssaid: “This is the sixth consecutive increase in quarterly GDP, but it is the slowest since the Covid-19 Delta lockdown in the September 2021 quarter.”
“Gross private and public fixed capital formation was the main driver of GDP growth in the quarter,” Keenan said.
GDP readings are key to the Reserve Bank of Australia’s monetary policy decision-making process. Just on Tuesday, the Reserve Bank of Australia unexpectedly raised its benchmark policy rate by 25 basis points to 4.1%, an 11-year high.
‘narrow road’
Speaking at the Morgan Stanley Australia Summit on Wednesday morning, Reserve Bank of Australia Governor Philip Lowe reiterated his stance that the central bank will seek to navigate a “narrow road”.
In the “narrow path” envisaged by Lowe, Australia’s inflation would return to its 2% to 3% target range, the economy would continue to grow and gains in the labor market would be preserved.
“It’s still possible to go down this path, and our ambition is to do so. But it’s a narrow path, it can be a bumpy one, and there are risks on both sides,” Lowe said.
Lowe clarified that the intention to keep the labor market improving “does not mean that (the RBA) will tolerate the persistence of higher inflation.”
As such, the decision to raise rates again on Tuesday “was designed to increase confidence that inflation will return to target within a reasonable time,” he said.
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