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Michael Gordon: Westpac Senior Economist on the GDP figures set to be released today · Early Edition with Ryan Bridge

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  Speaker 1: Geddp's out today for the March quarter. It's expected to
• 0:03
  Speaker 1: paint a picture of how the economy has reacted to
• 0:05
  Speaker 1: all the arging bargie that's happened over the last couple
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  Speaker 1: of months. Economists are expecting growth between point seven and
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  Speaker 1: one percent. That is up on the point two percent
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  Speaker 1: recorded in December. So did join me to preview this.
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  Speaker 1: It's Michael Gordon, Westpac's senior economists. So what's your pick?
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  Speaker 2: My picks a one percent rise for the quarters at
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  Speaker 2: the top end of that range of the pack. There
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  Speaker 2: are some little quirks around how GDP gets reported, which
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  Speaker 2: means that March quarters tend to be a bit overstated
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  Speaker 2: compared to the others. I'd say that like the underlying
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  Speaker 2: number I put it, that's maybe like a point six percent,
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  Speaker 2: which is pretty good. It's not raging away though.
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  Speaker 1: So if you say one percent quarterly growth, what would
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  Speaker 1: annual growth look like?
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  Speaker 2: We are looking at in your growth about one point
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  Speaker 2: two percent. There was actually a good March quarter last
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  Speaker 2: year which is dropping out, but there's been some very
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  Speaker 2: volatile quarterly GDP numbers, so I think it's probably is
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  Speaker 2: right to look at that year and year rate. One
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  Speaker 2: point two percent. It's a head of population growth where
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  Speaker 2: we're getting ahead of things slightly, which wasn't the case
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  Speaker 2: a year or two ago.
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  Speaker 1: It's only just ahead of population growth. We're still pretty anemic, really,
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  Speaker 1: aren't we.
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  Speaker 2: Yeah. It's in coming out of quite a marked downturn
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  Speaker 2: after the last couple of years. So normally this is
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  Speaker 2: the phase where we should be actually able to get
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  Speaker 2: some quite strong growth because there is lots of room
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  Speaker 2: to grow. But of course there are still some headwinds
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  Speaker 2: against the economy, notwithstanding I guess the more recent side
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  Speaker 2: of the Iran conflict, which is probably not going to
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  Speaker 2: show up in March quarter activity, but there is still
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  Speaker 2: I think the fact that we had I guess interest
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  Speaker 2: rate and relief over the last few years. Interest rates
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  Speaker 2: came down from high levels, never got particularly low. So
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  Speaker 2: it's really the case of the Reserve Bank. It sort
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  Speaker 2: of took its foot off the break, wasn't really stomping
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  Speaker 2: on the accelerator to get the economy going again in
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  Speaker 2: the way that it may have done in past cycles.
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  Speaker 1: Yeah, and you mentioned briefly, of course, the troubles that
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  Speaker 1: we've had and the oil shocks that we've had, and
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  Speaker 1: the energy shocks that we've had, and the weird thing
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  Speaker 1: is from all the data, and that's why we're waiting
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  Speaker 1: for the GDP or a GDP quarter that will actually
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  Speaker 1: illustrate what actually happened to us. But what we can
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  Speaker 1: see already from some little clues around the place is
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  Speaker 1: it's been quite a bizarre shock. In some areas it's
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  Speaker 1: hit as hard, but in other areas it hasn't hit
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  Speaker 1: us at all.
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  Speaker 2: Yeah, we're sort of still waiting for the tail and
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  Speaker 2: the tape on something. So you know areas that you
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  Speaker 2: might expect to be hits that are fuel intensive, like
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  Speaker 2: overseas tourism, you need to burn a lot of fuel
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  Speaker 2: to get a plane over here. I think it's been
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  Speaker 2: more gradual thing in terms of seeing those overseas visiting
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  Speaker 2: numbers starting to come down, But there are I think
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  Speaker 2: there is a long tail that in terms of airlines
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  Speaker 2: perhaps hedging and so on, so they can absorb it
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  Speaker 2: for a while.
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  Speaker 1: And of course you look at the GDP and then
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  Speaker 1: we start thinking about the OCR so what are your
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  Speaker 1: record is going to happen to rates.
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  Speaker 2: Well, we're a little bit different from the pack in
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  Speaker 2: terms of timing, so we think that the September meetings
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  Speaker 2: are more likely for the first increase in the ocr
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  Speaker 2: there's probably a majority expecting them to go in their
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  Speaker 2: early July meeting. However, I think that view was very
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  Speaker 2: much contingent on the idea of the jump and oil
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  Speaker 2: prices and flowing through to cost increases elsewhere. If that
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  Speaker 2: oil price shop is now reversing, which it has to
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  Speaker 2: a very large degree, the case for urgent action by
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  Speaker 2: the Reserve Bank starts to fall away, and then it
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  Speaker 2: comes back to, well, what's the state of the economy,
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  Speaker 2: What were they thinking about before this oil shop?
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  Speaker 1: What was the fundamentals exactly? Michael Gordon, I thank you
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  Speaker 1: for your time. Michael is Westpac senior Economists.
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  Speaker 2: For more from Early
• 3:48
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• 3:51
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