Employment is likely to be much weaker going forward and the jobless rate will keep rising as the economy cools. Interest rates are on hold.
It's a pretty disappointing number, much below market expectations and our own. Exports were particularly disappointing.
We still think commodity prices are at their peak and will gradually come off, but we've just pushed out the timing a little bit.
There's no need for the central bank to raise interest rates again.
The Reserve Bank will be happy with this result and be content to sit on the sidelines. Companies are wearing some of the price pressure rather than passing it on. When consumers are tightening their purses, retailers don't want to be cranking up prices.
This is a concern for Australia's growth outlook. We've been depending on better exports to take up some of the slack in the Australian economy as consumer spending cools. So far, that transition hasn't been very smooth.
The interest-rate advantage with the U.S. will continue to narrow and that will weigh on the Australian dollar.
There is further weakness ahead for consumers. House prices are falling, home construction is soft, consumer confidence is down and oil prices have risen.
We've been expecting exports to pick up some of the slack of the easing domestic demand and we're not seeing this to date. So clearly there are capacity constraints out there that remain.
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