Australian GDP figures for the second quarter came in well under expectations, only growing by 0.2% or 2.0% year on year. The result was half the market expectation of 0.4% for the quarter. In the first quarter growth was 0.9% with annual growth at 2.5%. A sharp drop in export income resulting from lower prices and volumes for commodities and weaker business (especially mining) investment was blamed. The poor GDP result was despite significantly higher government spending and buoyant consumer and housing sectors that had been helped by low interest rates. Westpac noted that this number was unlikely to surprise the RBA which forecast 2% growth in its August Statement on Monetary Policy and will not lead to the rate cut which markets already have priced in. Westpac’s chief economist, Bill Evans, said “It does not appear to us…this print of the national accounts convincingly makes the case for further rate cuts.” UBS said something similar. “This is consistent with ours and the RBA’s near-term outlook for below-trend GDP growth of just 2.0%-2.5% and a cash rate unchanged at 2.0%.” AMP’s Shane Oliver held the contrary view saying 2.0% growth was well below potential and implied rising spare capacity which would lead the RBA to ease again and the dollar to drop below US$0.65. ANZ’s chief economist Warren Hogan said, “We are likely to see growth around this level for a long time.”