The slowdown in Australia's real GDP growth in Q310 is in line with our bearish view that weakening investment and private consumption growth will cause a drag in headline expansion going forward. Indeed, we are pencilling in economic growth of only 1.6% and 2.3% for 2011 and 2012 respectively, weaker than the forecast 2.8% expansion in 2010.
Australia's economic growth decelerated considerably in Q310, expanding by only 0.2% quarter-on-quarter (q-o-q) (seasonally-adjusted), from a revised 1.1% registered in Q210. The recent slowdown in the country's real GDP expansion was in line with our view that the rise in borrowing costs, fall in consumer confidence, and weakening residential property sector will lead to lower headline growth going forward. With this in mind, we maintain our view that the Australian economy will expand by only 1.6% in 2011, before rebounding slightly to 2.3% in 2012. These figures are much lower than our projected 2.8% growth for Australia in 2010