SPIROS PAPADOPOULOS, SENIOR ECONOMIST, NAB
"This reflects the strength of consumption in the first quarter, helped by the government stimulus packages and the net exports gain also contributing strongly. But really the investment side of the economy is still very weak. We still see fairly weak conditions in the economy. We don't see a return to trend growth until late this year, early 2010."
MICHAEL BLYTHE, CHIEF ECONOMIST, COMMONWEALTH BANK
"We've dodged the recession bullet for the time being, but in reality we've had five quarters of sub-trend growth and unemployment has gone up in that period. So while we might not be officially able to tick off recession, to all intents and purposes, we are there."
"It's stronger than the RBA (Reserve Bank of Australia) was expecting, and it's reinforcing that 'on-hold for the time being' message."
HELEN KEVANS, ECONOMIST, JPMORGAN
"We did get a positive reading which signals the economy has technically skirted recession, but if you look at the details it's still a pretty bleak picture."
"You've got business investment tanking and imports falling off a cliff. We think that will remain the case going forward."
"Government spending is still picking up the slack, and we think that will tail off in the remaining three quarters of this year, so we can't rule out another negative GDP print in the second quarter."
MARKET REACTION:
The Australian dollar firmed a quarter of a US cent on the report. Bond and bank bill futures were soft as investors priced in less chance of further rate cuts after the RBA skipped a chance to ease at its June policy meeting yesterday.
BACKGROUND:
- Up until yesterday, analysts had been looking for a small contraction in GDP but a stunningly large contribution from net exports reported changed all that.
- An updated Reuters poll of 20 economists found the median forecast was for a 0.2 percent rise in GDP in the first quarter, with estimates ranging from a 0.7 per cent fall to an increase of 1.0 per cent.
- But uncertainty is high with analysts noting that income-and production-based measures of GDP were negative, with all the growth in the expenditure measure of GDP.
- Australia has achieved a rare feat among developed economies by dodging a technical recession. The US economy contracted by around 1.6 per cent in the first quarter, Canada by 1.4 per cent, Germany 3.8 per cent and Japan 4 per cent.
- The statistics bureau defines GDP as the total market value of goods and services produced in Australia after deducting the cost of goods and services used up in the process of production but before deducting allowances for the consumption of fixed capital.
Reuters
