Australia's economy grew 2.1% in the second quarter. Economists expected less. The Reserve Bank of Australia now has "room" to tighten policy, which is financial media code for "they were going to do it anyway but now they get to pretend the data made them."
The GDP beat changes nothing. The RBA announced its inflation concerns months ago. They telegraphed rate hikes. They prepared the market. But everyone needs to act like this one data point gave them fresh clarity, as if central bankers sit in a dark room waiting for quarterly GDP prints before deciding whether inflation exists.
Retail traders are currently Googling "what does policy tightening mean" and discovering it's bad for their tech stocks. They bought the dip seventeen times this year. Each time they told themselves this was the bottom. They have now learned that Australian economic data impacts their portfolio, which is information they could have acquired by reading literally anything before hitting the buy button.
The best part is the phrase "beating expectations." Expectations set by whom? Economists who missed the last eight major moves? The same analysts who predicted twelve of the last three recessions? Australia could have posted 0.9% growth and these people would write "modest slowdown gives RBA flexibility to pause tightening." They'd find a way to make any number mean whatever they decided it meant before the data dropped.
Some guy in Sydney just checked his brokerage account and realized his Australian equity position is down 8% this month despite the economy beating expectations. He's confused. He thought good news was good. He's currently typing "why stocks down when GDP up" into Reddit. The top answer will be a 4,000-word explanation of forward-looking pricing that he'll skim for six seconds before buying more.
The RBA meets next month. They'll raise rates. Everyone knows it. The GDP print just gave them cover to do what the script already called for.
Photo by on Unsplash
Leave a Comment