Australia's Q3 GDP, to be revealed on December 4, is expected to show a slight improvement in economic activity, with both private and public sectors contributing to the growth.
According to Pat Bustamante (pictured above), senior economist at Westpac, growth in private demand will be modest but positive, while public demand continues to play an outsized role.
“New public demand is expected to grow 1.9% quarter-on-quarter in Q3, more than double the pre-pandemic decade average, reaching a record high of 27.7% of real GDP,” Bustamante said.
This surge reflects government spending on cost-of-living measures, public transport subsidies, and infrastructure projects.
According to Westpac, private demand is predicted to grow by 0.4% in Q3 after a flat performance in Q2. This includes:
Bustamante noted that while private demand is improving, its growth remains below pre-pandemic averages.
“In per capita terms, private demand likely declined slightly, indicating that households and businesses are still cautious,” he said.
Public demand is a standout, with strong growth in public infrastructure projects and increased government subsidies supporting households.
Electricity rebates and concessional transport fares contributed significantly, while infrastructure works helped keep public investment elevated.
Labour productivity, however, remains a mixed picture. Non-market sector hours worked surged 2.3% in Q3, while market sector productivity saw minimal gains, Westpac data showed.
Bustamante explained that productivity declines are being skewed by the growth of the non-market sector, which operates with lower measured productivity.
Net exports are expected to make a slight positive contribution (+0.1 percentage points) to GDP in Q3, driven by a strong performance in mining exports. However, inventory drawdowns will detract by -0.4 percentage points as businesses rely on existing stock to meet demand.
Public sector inventory reductions, including health product stockpiles, will also weigh on overall figures.
The economic outlook remains uncertain as population growth slows and one-off government support measures wane. Bustamante highlighted the need for private sector demand to pick up the slack.
“Without stronger private demand, the economy could struggle to maintain momentum,” the Westpac economist said.
Australia’s Q3 GDP figures will provide critical insights into the interplay of public spending, private sector activity, and external trade as the economy navigates a challenging post-pandemic environment.
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