Australian GDP Lower than Expected, Growth a Problem

by on December 4, 2013 12:59 am GMT

Analysts quickly linked China’s growth with Australia as if Australia is growing. Clearly, the fundamentals show a different story. Third-quarter gross-domestic product prints .6 percent, lower than the .7 percent expectations.

Non-dwelling contractions and machinery investment drop. A 12.6 percent decline in non-dwelling construction from three months prior contributed to a 1.3 percent deduction from GDP. Growth has been a problem since the mining  boom and investments begin to wane, a key reason Australia was able to whether the global meltdown nearly unscathed.

The Reserve Bank of Australia (RBA) choose to keep rates at 2.5 percent earlier this week, but the continue decline in growth will force the RBA to act further. “The central bank will cut again early next year to provide more support as mining investment begins to fall,” Daniel Martin, an economist at Capital Economics Ltd.

The Australian dollar declined on the news. AUDUSD broke .91 again after rising on dollar weakness. “It’s still a cautious outlook,” said David de Garis, senior economist at National Australia Bank Ltd.

Previous support and resistance levels remain intact as price action has been consolidating. A break below current support will cause a larger move to .8970. However, AUDUSD could see a pullback to .9106 on poor data out of the US tomorrow.

1D Chart of AUDUSD

1D Chart of AUDUSD