A recession is generally defined by economists as two consecutive quarters of negative GDP, an event which last occurred in Australia in 1991. That recession became known as “the recession we had to have” after the then-Treasurer Paul Keating described it in that way. Since that time, Australia has had the odd negative quarter, such as in the September quarter of 2016 and the March quarter of 2011, but not two in a row.
The latest figures released by the ABS indicate March quarter GDP grew by 1.0%, comfortably above the 0.8% expected by economists. Growth in the March quarter was double that of December’s 0.5% and the year-on-year growth figure jumped from 2.4% to 3.1%.
Markets reacted by sending bond yields and the AUD higher. 3 year bond yields increased by 3bps to 2.22%, 10 year yields added 4bps to 2.77% and the local currency added 0.5 US cents and finished at 76.70 US cents. However, the probability of rate changes by the RBA in coming months was largely unchanged.