GDP figures surpass predictions, yet overall growth remains lackluster

The Australian economy’s deceleration persisted throughout the year, as recent data reveals a slowdown in annual growth. Weakening household spending and lackluster productivity growth weighed on the Australian economy in the June quarter, although the growth still exceeded expectations, according to the latest data.

In the three months leading up to June, the economy expanded by 0.4 percent, as indicated by the newly released national accounts figures from the Australian Bureau of Statistics on Wednesday. These GDP growth numbers remained consistent with a 0.4 percent increase seen in March, surpassing the consensus forecasts of 0.3 percent for the June quarter.

However, the annual growth rate dipped from an upwardly revised 2.4 percent to 2.1 percent, as persistent price pressures and high interest rates acted as constraints on economic activity. When accounting for the surge in population due to increased migration, real GDP per capita actually declined by 0.3 percent.

The Australian economy’s deceleration persisted throughout the year, as recent data reveals a slowdown in annual growth.

The Australian Bureau of Statistics reported a 2.0 percent drop in labour productivity (output per hours worked) in the June quarter and a 3.5 percent decrease over the past year, bringing productivity levels back to those seen in March 2016. As the Reserve Bank’s efforts to curb demand through 12 interest rate hikes ripple through the economy, household consumption only grew by 0.1 percent. This aligns with other data suggesting that higher borrowing costs are dampening spending on non-essential items.

Discretionary consumption experienced a 0.5 percent decline in the June quarter, a steeper drop compared to the 0.2 percent decrease in March. Additionally, the household savings ratio dipped from 3.6 percent to 3.2 percent, reaching its lowest level since June 2008.

Addressing the National Accounts, Treasurer Jim Chalmers expressed his expectation that economic growth would remain sluggish in the forecast period, stating, “Our expectation, our forecast in the budget, is that the Australian economy will continue to grow but at a slow pace.”

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