Australian lowest growth in a decade not a surprise: Expert
CGTN Global Business
Australia has recorded its weakest economic growth in a decade as its economy just grew at 1.4 percent year on year in the second quarter of 2019. The weak economy is not a new story. But the growth itself is a surprise, as it is expected to be flat, according to Australian financial columnist Daryl Guppy.
Official data on Wednesday showed that Australian GDP growth rose 1.4 percent year on year in the second quarter of 2019, the lowest level since the global financial crisis. And the quarter-by-quarter growth was just 0.4 percent.
"It is not a surprise. The reserve bank has been saying that the underlying economy is weak. The weakness is there, not a surprise. But the surprise is that the growth is not smaller than it actually performed," he said.
The Australian Bureau of Statistics said the small increase was driven by mining exports and government spending. Guppy shared a similar opinion by saying that the major strength of the Australian economy has been "its export and depreciation of the Australian dollar."
Meanwhile, iron ore exports are vital to the Australian economy. Despite global ore prices surging in the second quarter, the economy has only had a limited benefit from that increase.
"It [Australian economy] has benefited from the ore prices, but not significantly. And the income from export has been masked by the underlying economic problem," the columnist explained.
He further commented that the small growth is closely related to the depreciation of Australian dollar versus U.S. dollar as most of exports are priced in the U.S. dollar, rather than on "the quality of what we are doing."
And Guppy was concerned that the fluctuant trade war hit not only China and the U.S. but also other middle economies, such as Australia, in the global value chain.
Moreover, the Reserve Bank of Australia is expected to further cut interest rates in the coming months to stimulate the economy. "I do expect it to happen," he told CGTN, but saying that the rate cut might not help boost the economy.