The Australian Bureau of Statistics (ABS) national accounts data due next week are expected to show gross domestic product (GDP) expanded by 0.4 per cent in the September quarter, a survey of 13 economists’ forecasts by AAP shows.

The median forecast for annual GDP growth is 0.7 per cent.

In the June quarter, GDP grew by 0.6 per cent for an annual pace of 0.6 per cent.

Westpac senior economist Andrew Hanlan said the Australian economy had performed solidly in the second half of 2009.

“A burst of public investment, the start of the housing construction boom and an end to the run-down of inventories were the key positives in the quarter,” Mr Hanlan said.

“That more than offset a likely decline in private demand, as consumer spending stabilised with the end of the `cash splash’ and business investment fell after the bring forward into the June quarter, triggered by tax incentives.”

The Federal Government announced a total of $53 billion in stimulus spending in October 2008 and February this year to support the local economy from the global economic downturn.

Among the measures of the fiscal stimulus packages were around $20 billion in cash handouts to low- to middle-income earners, a boost to the first home owners scheme and building-related work of $28.8 billion for schools, housing and roads.

AMP senior economist Bob Cunneen said the government stimulus and Reserve Bank of Australia’s (RBA) interest rate cuts in early 2009 had cushioned the local economy from the worst of the global economic downturn.

The RBA lowered the overnight cash rate by 4.25 percentage points to three per cent, a 49-year low, between September 2008 and April 2009.

Subsequently, the central bank has lifted the cash rate by 25 basis points at each of its October, November and December board meetings.

“It has been a case of where it has been the key stabiliser and the key impulse over the last three quarters in particular,” Mr Cunneen said.

“That is the key reason, apart from the interest rate cuts, that Australia has avoided a deep recession.”
UBS senior economist George Tharenou said the inventory cycle had turned and firms were beginning to restock as the economic upswing gathers pace.

“What has been the surprise this quarter has been the extent of the stock rebuild, which is adding almost two percentage points to growth,” Mr Tharenou said.

“That is probably one swing factor where you get the production cycle re-starting and the inventories have been rebuilt in the private sector particularly sharply.”

Mr Tharenou said the rebound in stocks would offset the 1.8 percentage points detraction from GDP by net exports.

Macquarie Group senior economist Brian Redican said business investment would be quite weak in the third quarter despite the lift from public spending.

New private capital expenditure fell 2.9 per cent in real terms, seasonally adjusted, in the September quarter.

“If it was not for the government spending, business investment itself would have been weaker as well,” Mr Redican said.

“For direct contribution and indirect contribution, it has been critical.”