Well now we know. Australia’s annual GDP growth rate fell to its lowest level since December 1991, outside of the pandemic as consumers hunkered down in the face of elevated borrowing costs and stubbornly sticky inflation.
Annual GDP growth has slowed markedly from a decade average of 2.4%, partly due to the RBA’s rate tightening campaign through 2022-23 to rein in inflation. The cash rate is currently at a 12-year high of 4.35% and policymakers have signaled they’re in no rush to cut any time soon.
Australia’s Q2 GDP was worse than economists expected, growing by only 0.2% over the quarter to be up only 1.0% year-on-year. The result missed analysts’ expectations of a 0.3% quarterly rise.
With Australia’s population still growing aggressively through net overseas migration, population increased by 0.6% in Q2, meaning that per capita GDP declined by another 0.4%. In fact, Australia’s per capita GDP has now declined for six consecutive quarters and seven of the past eight quarters, to be down 2.0% from its peak.
As you will know if you have been following my surveys, the household sector is especially hurting as higher household earnings were partly offset by an increase in income tax payable and mortgage payments and so despite the population surge, Household spending actually fell 0.2% in the second quarter, detracting 0.1 percentage point from GDP growth. Discretionary consumption was hit particularly hard. This puts a number on the political pain of falling living standards from the inflationary cost-of-living squeeze, made worse for mortgage borrowers by the RBA’s higher interest rates.
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Well now we know. Australia’s annual GDP growth rate fell to its lowest level since December 1991, outside of the pandemic as consumers hunkered down in the face of elevated borrowing costs and stubbornly sticky inflation.
Annual GDP growth has slowed markedly from a decade average of 2.4%, partly due to the RBA’s rate tightening campaign through 2022-23 to rein in inflation. The cash rate is currently at a 12-year high of 4.35% and policymakers have signaled they’re in no rush to cut any time soon.
Australia’s Q2 GDP was worse than economists expected, growing by only 0.2% over the quarter to be up only 1.0% year-on-year. The result missed analysts’ expectations of a 0.3% quarterly rise.
With Australia’s population still growing aggressively through net overseas migration, population increased by 0.6% in Q2, meaning that per capita GDP declined by another 0.4%. In fact, Australia’s per capita GDP has now declined for six consecutive quarters and seven of the past eight quarters, to be down 2.0% from its peak.
As you will know if you have been following my surveys, the household sector is especially hurting as higher household earnings were partly offset by an increase in income tax payable and mortgage payments and so despite the population surge, Household spending actually fell 0.2% in the second quarter, detracting 0.1 percentage point from GDP growth. Discretionary consumption was hit particularly hard. This puts a number on the political pain of falling living standards from the inflationary cost-of-living squeeze, made worse for mortgage borrowers by the RBA’s higher interest rates.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Well, now we know, according to official data Australian households are faring worse than the broader economy and are mired in recession. The Australia’s economy slowed in the final three months of last year, growing 0.2%, easing from an upwardly revised 0.3% in the prior quarter, and below expectations. From a year earlier, the economy grew 1.5% and this annual result was the weakest, outside the pandemic, since the final quarter of 2000 and below the decade average of 2.4%.
Wednesday’s data showed government spending and private business investment were the main drivers of growth, outpacing household consumption. Government spending was driven by “benefits for households, with more spending on medical products and services and higher employee expenses across commonwealth departments,” the ABS, said. A referendum for an Indigenous advisory body to Parliament “held during the quarter also contributed to the rise in employee expenses.”
The more important per capita measure, (activity divided by population) showed that the per capita recession deepened as higher rates and rising living costs dragged on household spending, despite record migration for a fourth consecutive quarter. In per person terms, GDP fell 0.3% from the third quarter and was 1% lower than a year earlier, the deepest downturn, also outside of the Covid-era, since 1991. Real per capita household final consumption plunged by 2.5% in 2023,
Inflation continued to impact most goods and services. The consumer price index rose 0.6 per cent in the December quarter and was up 4.1 per cent in the past 12 months. This was the smallest quarterly rise since March quarter 2021. Insurance got more expensive, as higher insurance premiums sent prices up 3.8 per cent. Increased tobacco taxes saw the price of cigarettes up 7.0 per cent.
Wage reviews pushed wage growth higher. The wage price index rose 0.9 per cent during the quarter and 4.2 per cent over the year. This was the highest recorded annual growth since the March quarter 2009. Public sector wages grew 1.3 per cent on the back of new workplace agreements, including those for teachers and nurses.
The labour market started to slow. Job vacancies fell slightly by 0.7 per cent during the quarter but remained high. The unemployment rate inched up reaching 3.9 per cent in the month of December, as participation rates stayed close to record highs.
Labour productivity rose again. We worked similar hours to last quarter, with the amount of time we spent at work remaining historically high. Overall labour productivity rose 0.5 per cent during the quarter, which was the second successive quarterly rise following a period of falling labour productivity. While the increase pushed labour productivity back to late 2019 levels, the RBA has warned that growth must be sustained at an annual rate of about 1 per cent to prevent current rates of wage growth from fuelling high inflation. NAB group chief economist Alan Oster said the strength of the underlying pace of productivity growth remained uncertain.
One of the biggest pressures on household budgets is personal income tax, which ate up a record 16.5 per cent of earnings over the past year as wage inflation pushed workers into higher tax brackets. Because tax brackets are not indexed to inflation, increases in nominal wages lead to increases in average taxes, since a greater proportion of a worker’s pay is pushed into the highest bracket applicable to them.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Well, now we know, according to official data Australian households are faring worse than the broader economy and are mired in recession. The Australia’s economy slowed in the final three months of last year, growing 0.2%, easing from an upwardly revised 0.3% in the prior quarter, and below expectations. From a year earlier, the economy grew 1.5% and this annual result was the weakest, outside the pandemic, since the final quarter of 2000 and below the decade average of 2.4%.
Wednesday’s data showed government spending and private business investment were the main drivers of growth, outpacing household consumption. Government spending was driven by “benefits for households, with more spending on medical products and services and higher employee expenses across commonwealth departments,” the ABS, said. A referendum for an Indigenous advisory body to Parliament “held during the quarter also contributed to the rise in employee expenses.”
The more important per capita measure, (activity divided by population) showed that the per capita recession deepened as higher rates and rising living costs dragged on household spending, despite record migration for a fourth consecutive quarter. In per person terms, GDP fell 0.3% from the third quarter and was 1% lower than a year earlier, the deepest downturn, also outside of the Covid-era, since 1991. Real per capita household final consumption plunged by 2.5% in 2023,
Inflation continued to impact most goods and services. The consumer price index rose 0.6 per cent in the December quarter and was up 4.1 per cent in the past 12 months. This was the smallest quarterly rise since March quarter 2021. Insurance got more expensive, as higher insurance premiums sent prices up 3.8 per cent. Increased tobacco taxes saw the price of cigarettes up 7.0 per cent.
Wage reviews pushed wage growth higher. The wage price index rose 0.9 per cent during the quarter and 4.2 per cent over the year. This was the highest recorded annual growth since the March quarter 2009. Public sector wages grew 1.3 per cent on the back of new workplace agreements, including those for teachers and nurses.
The labour market started to slow. Job vacancies fell slightly by 0.7 per cent during the quarter but remained high. The unemployment rate inched up reaching 3.9 per cent in the month of December, as participation rates stayed close to record highs.
Labour productivity rose again. We worked similar hours to last quarter, with the amount of time we spent at work remaining historically high. Overall labour productivity rose 0.5 per cent during the quarter, which was the second successive quarterly rise following a period of falling labour productivity. While the increase pushed labour productivity back to late 2019 levels, the RBA has warned that growth must be sustained at an annual rate of about 1 per cent to prevent current rates of wage growth from fuelling high inflation. NAB group chief economist Alan Oster said the strength of the underlying pace of productivity growth remained uncertain.
One of the biggest pressures on household budgets is personal income tax, which ate up a record 16.5 per cent of earnings over the past year as wage inflation pushed workers into higher tax brackets. Because tax brackets are not indexed to inflation, increases in nominal wages lead to increases in average taxes, since a greater proportion of a worker’s pay is pushed into the highest bracket applicable to them.
The Australian Bureau of Statistics (ABS) has released the June quarter National Accounts, which were an unmitigated disaster and confirmed that Australia is in a deep per capita recession.
The economy as measured by real GDP grew by only 0.2% in the September quarter, driven by increased government consumption and capital investment over the quarter and badly missing economists’ expectations of a 0.4% print: Growth over the year was 2.1%, less than population growth over the same period. While the population surge earlier in the year has supported demand overall, it is now rolling over and will not provide the same support in 2024. Or as Luci Ellis, at Westpac put it The Australian economy limped along in the September quarter.
Real per capita GDP has fallen for three of the past five quarters, with the March quarter revised up to flat. Accordingly, GDP per capita fell 0.3% over the year. Expenditure by households was dead flat over the September quarter and would have fallen by around 0.7% per capita. By contrast, growth in both household consumption and GDP over 2023 slowed due to sustained cost of living pressures and higher interest rates. Household consumption would have fallen even further had the savings rate not fallen to just 1.1%, which is the lowest level since December 2007.
The savings rate is now well below the ‘par’ of 6.5% and notionally implies a draw-down on the ‘additional savings’ accumulated during the pandemic – estimated at around $260bn – running at about $12bn a quarter. In total, about $43bn, or 16.5% of this reserve now looks to have been drawn down. Of course these are not equally spread across households, with many now having no buffers at all.
As Westpac put it. the policy drag on Australian households is clearly biting.
Digital Finance Analytics (DFA) Blog
Paying Tax And Interest Through The Nose In A Deep Per Capita Recession!
The Australian Bureau of Statistics (ABS) has released the June quarter National Accounts, which were an unmitigated disaster and confirmed that Australia is in a deep per capita recession.
The economy as measured by real GDP grew by only 0.2% in the September quarter, driven by increased government consumption and capital investment over the quarter and badly missing economists’ expectations of a 0.4% print: Growth over the year was 2.1%, less than population growth over the same period. While the population surge earlier in the year has supported demand overall, it is now rolling over and will not provide the same support in 2024. Or as Luci Ellis, at Westpac put it The Australian economy limped along in the September quarter.
Real per capita GDP has fallen for three of the past five quarters, with the March quarter revised up to flat. Accordingly, GDP per capita fell 0.3% over the year. Expenditure by households was dead flat over the September quarter and would have fallen by around 0.7% per capita. By contrast, growth in both household consumption and GDP over 2023 slowed due to sustained cost of living pressures and higher interest rates. Household consumption would have fallen even further had the savings rate not fallen to just 1.1%, which is the lowest level since December 2007.
The savings rate is now well below the ‘par’ of 6.5% and notionally implies a draw-down on the ‘additional savings’ accumulated during the pandemic – estimated at around $260bn – running at about $12bn a quarter. In total, about $43bn, or 16.5% of this reserve now looks to have been drawn down. Of course these are not equally spread across households, with many now having no buffers at all.
As Westpac put it. the policy drag on Australian households is clearly biting.
