Australia economy hits dry spell as incomes fail to flow
* Company profits, wages show muted growth in Q4
* Q4 GDP seen up modest 0.4 pct q/q, risks to downside
* Home approvals point to construction slowdown ahead
* Job ads slip for fourth straight month in Feb
By Wayne Cole
SYDNEY, March 4 (Reuters) - Australian businesses reported
only meagre growth in profits and wages for the fourth quarter
of last year, a dry spell for incomes that likely saw the whole
economy struggle to expand.
A range of data out on Monday also showed home building was
heading for a deep hole after years of outperformance, while job
ads suffered their biggest annual drop in five years.
The signs were of an economy that has clearly lost traction
in recent months and may have grown only marginally in the
December quarter, figures for which are due Wednesday.
Analysts suspect gross domestic product (GDP) expanded by a
pedestrian 0.4 percent in the December quarter, with weakness in
wages and house prices curbing consumption.
Annual growth is seen slowing to around 2.6 percent, from
2.8 percent, challenging the Reserve Bank of Australia's (RBA)
optimism for a pick up to 3 percent this year.
The central bank, which holds its March policy meeting on
Tuesday, recently warned that a further significant fall in home
prices could undermine household wealth and spending, and
perhaps warrant a cut in interest rates.
Falling prices combined with tighter bank lending have also
sent a chill across the construction industry with approvals to
build new homes down 29 percent in February from a year earlier.
While Monday's figures from the Australian Bureau of
Statistics showed approvals bounced 2.5 percent from January,
that followed two months of very sharp falls.
"The update pares back some of the concerning weakness that
was emerging through the back end of 2018, particularly around
non high-rise activity," said Westpac economist Matthew Hassan.
"However, the through the year numbers are clearly still
very weak and dwelling construction will continue to detract
materially from growth in 2019."
PROFITS TOUGH TO COME BY
With consumers cautious, companies were finding it harder to
make money. Gross operating profits undershot forecasts with a
rise of just 0.8 percent in the December quarter, and that
despite a windfall for miners from high commodity prices.
Neither were firms keen to splash out. The wages bill for
business rose 0.8 percent in the quarter, only a fraction ahead
of employment growth. That implied firms were taking on new
workers rather than paying current staff much more.
The resilience of the labour market has been a rare source
of comfort for policy makers. RBA Governor Philip Lowe has said
rates would only be cut if there was a significant and sustained
rise in the unemployment rate, currently at 5.0 percent.
So the latest survey on jobs ads could be a worry.
Figures from Australia and New Zealand Banking Group
showed total job advertisements fell 0.9 percent in
February, from January when they slipped 1.7 percent.
That was the fourth straight month of losses and left ads
down 4.3 percent on a year earlier.
"The labour market has been a key source of strength for the
Australian economy over the past year, with the strong gain in
jobs and declining unemployment rate providing a material offset
to the impact of lower house prices," said ANZ's head of
Australian economics, David Plank.
"The year ahead looks to be more challenging."
(Reporting by Wayne Cole
Editing by Shri Navaratnam)
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