The fall in GDP in the third quarter means that the data for the fourth quarter will determine whether or not Australia succumbs to its first recession in 25 years. We think it will escape, but only just. Either way, the bigger picture is that GDP growth hasn’t been, and won’t be, strong enough to generate much of a rise in underlying inflation. Based on October’s data for retail sales, building approvals and international trade, we estimate that GDP is on track to rise by around 0.3% q/q in the fourth quarter. That would be consistent with other indicators, which show that economic growth has slowed rather than slumped.
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