Australia’s economy limped across the 2023 finish line as financially-strained households pinched pennies and prioritised essentials over nice-to-haves.
The economy expanded 0.2 per cent in the three months to December – broadly in line with market forecasts – and had been slowing a little more each quarter of the year.
On an annual basis, the Australian Bureau of Statistics recorded a 1.5 per cent lift in gross domestic product – the slowest annual growth rate since COVID-19.
GDP per capita fell one per cent over the year as the population grew strongly.
Another weak growth result had been widely anticipated by economists with the Reserve Bank’s aggressive interest rate hiking cycle working to slow the economy and dull the inflationary pulse.
The ABS said domestic demand was slowing as households cut back on discretionary spending.
Household spending rose 0.1 per cent in the December quarter, driven by a 0.7 per cent lift in purchases of essentials offset by a 0.9 per cent fall in discretionary spending.
Moody’s Analytics economist Harry Murphy Cruise said business and government spending helped lessen some of the pain felt keenly in household sector.
“That’s about where the good news ends,” he said.
“The dastardly duo of rising prices and elevated borrowing costs are squeezing family budgets.”
Trade was the biggest source of growth over the quarter but Mr Murphy Cruise said this was not necessarily a promising result as it was driven by imports falling more than exports as households eased up on overseas purchases.
Treasurer Jim Chalmers said any growth, albeit weak, was significant given higher interest rates and challenging global conditions.
He told reporters on Wednesday inflation was still the primary economic challenge and the focus for his government.
“But what these numbers show today, and the quite weak growth that we see in GDP in particular, is that the balance will shift over time,” Dr Chalmers said.
Shadow treasurer Angus Taylor said the economy was in a deep per capita recession and living standards were in decline.
“These are a shocking set of numbers,” he said.
He said the government had applied the wrong toolkit to deal with inflation and the results were starting to show.
For the Reserve Bank, the growth figures were broadly in line with its forecasts.
But Commonwealth Bank head of Australian economics Gareth Aird said the consumer sector had been a lot weaker than the RBA anticipated and could come as a surprise.
“Economic growth will remain below trend over coming quarters and the unemployment rate will continue to lift,” he said.
“This will in turn alleviate wages pressures and see disinflation continue.”
CBA is still forecasting a September start date for interest rate cuts.
“We expect a string of rate cuts once the RBA eases policy to prevent the unemployment rate from rising to around five per cent.”
Wrap
Poppy Johnston
(Australian Associated Press)
