Australian Dollar rebounds after initial selling as speech of RBA Deputy Governor Guy Debelle echoed much of recent communications. There was no extra dovishness in his comments.
He noted that the weaker than expected GDP growth in second half of last year was primarily due to considerable slower growth in consumption. The main explanation is low growth in household income, and an increasing expectation that it is likely to remain low
However, other parts of GDP have evolved broadly as we had expected. Business investment outside mining has been “growing at a rate”. Exports have “continued to grow as expected”. Residential construction is at a “historically high level”. Also, labor market has been “surprisingly strong”.
Debelle noted that “the two lenses on economic growth provided by the labour market and the GDP data are in stark contrast”. Meanwhile, “a third lens, in the form of business surveys, sits in between the two”. And he noted that “the tension highlighted by these different lenses on economic growth is of crucial importance. Hopefully we will get some resolution of this tension in the coming months with the incoming flow of data.”
