Consumption-Driven Growth Tempers RBA Cut Expectations

• Q2 GDP surprised on the upside, rising 0.6% q/q versus 0.5% consensus, leaving annual growth at 1.8%. The lift came from household consumption, up 0.9% in the quarter.
• Stronger spending, supported by real income growth, more than offset softer government contributions.
• Business investment remains subdued, but with public demand easing, the shift toward private-sector activity is becoming more important. How this plays out for jobs and wages will be key for the RBA to watch.
• Markets pared back November RBA cut expectations to around 22bp, compared with a fully priced 25bp before the release.