Australia’s GDP growth slow but steady: ABS

The nation’s economy grew 0.2 per cent in the December quarter but the country's annual GDP rose at the slowest rate since the pandemic, according to latest figures from the Australian Bureau of Statistics.

The ABS today released its data on Australia’s economy, finding a 0.2 per cent growth in the country’s gross domestic product (GDP) for the December quarter.

According to ABS, the country’s GDP rose 1.5 per cent since December 2022 which was the slowest annual growth rate since the COVID-19 pandemic.

ABS national accounts head Katherine Keenan said growth was steady in December but slowed down across each 2023 quarter.

“Government spending and private business investment were the main drivers of GDP growth this quarter,” she said.

The ABS found government spending rose 0.6 per cent in the December quarter while household spending rose 0.1 per cent with increases across all essential categories.

Ms Keenan said households upped their spending on electricity, rent, food and health.

“Meanwhile they wound back spending in discretionary areas including hotels, cafes and restaurants, cigarettes and tobacco, new vehicle purchases and clothing and footwear,” she said.

Federal Treasurer Jim Chalmers said the ABS’ national accounts showed the country’s growth was subdued but steady.

“Slow growth is still significant growth given challenging global conditions and the impact of higher interest rates,” he said.

“The UK and Japan both finished the year in recession. Around a quarter of G20 nations have recorded a technical recession or narrowly avoided one, and yesterday Chinese authorities announced that they expect a period of softer growth to continue there.   

“Today’s new numbers show we are not immune from slowing global growth, strained supply chains and the uncertainty and volatility from conflicts in Europe and the Middle East, but the Australian economy continues to grow.”

Mr Chalmers said the Australian economy was better placed than most countries but noted the existing pressures on businesses and households.

“Today's figures show Australians are earning more and keeping more of what they earn,” he said.

“Wages per employee grew 0.4 per cent in the quarter, to be 5 per cent higher through the year.

“This is faster than the inflation measure in the National Accounts, and further evidence that real wage growth is now back as a feature in our economy.”

Economists’ responses

Economists across Australia have predicted rate cuts or steady rates amid the recent ABS economic data.

Deloitte Access economics partner Stephen Smith said the recent ABS data showed Australia’s per capita recession continued to deepen.

Mr Smith said the latest data showed the Reserve Bank of Australia’s interest rate hike in November 2023 was unnecessary.

“Australian consumers are suffering from higher interest rates and cost of living pressures, while the rate of housing investment remains in the doldrums,” he said.

“Businesses are also suffering, with insolvencies on the rise. Growth is being propped up by government spending.

“There is simply not enough demand in the Australian economy to justify the RBA’s claim about ‘homegrown’ inflation.”

Mr Smith said the economy has shrunk by 1.0 per cent, on a person basis, over the 12 months to December.

“Growth of 0.2 per cent in the December quarter of 2023 means that the economy grew by just 1.5 per cent over the previous 12 months,” he said.

“Excluding the pandemic and the impact of the GST, this is the slowest rate of economic growth since the recession of the early 1990s.

“Combined with soft inflation data released earlier, today’s data shows that the Australian economy merely crawled to the end of the 2023 calendar year.”

Job site Indeed’s Asia-Pacific economist Callam Pickering said the 0.2 per cent rise was a weak result.

“Australian economic growth remains lacklustre,” he said.

“Hampered by cost-of-living pressures and tight monetary policy, the economy has been propped up by population growth.”

“For the fourth consecutive quarter, economic activity declined on a per capita basis and the 1 per cent decline over the past year is the largest Australia has experienced in 33-years, excluding the pandemic.”

Mr Pickering said ABS’ latest GDP data was more evidence of an economic slowdown.

“The next movement for monetary policy is more likely to be down than up,” he said.

“Our view is that economic conditions will remain subdued this year, consistent with what we’ve seen recently. And that should prove sufficient to bring inflation back to target, likely ahead of the RBA’s current forecasts.

“Rate cuts in the second half of the year are increasingly plausible and there will be lots of discussion to that effect in the months ahead.”

Moody's Analytics economist Harry Murphy Cruise said there were some good news with businesses and government spending.

“At the same time, total public spending rose 0.4 per cent—largely thanks to higher spending on medical goods and services and higher spending related to the Voice referendum,” he said.

“That’s about where the good news ends. The dastardly duo of rising prices and elevated borrowing costs are squeezing family budgets.

“While overall household spending rose 0.1 per cent quarter-on-quarter, it fell 0.5 per cent on a per capita basis. This builds on a run of falls starting in December 2022.”

However, Mr Murphy Cruise said the economy started much better in 2024 than it ended in 2023.

“The retreat in inflation is ahead of schedule, allowing wage gains to give households’ purchasing power a teeny-tiny boost,” he said.

“What’s more, business investment intentions remain sturdy and consumer confidence is edging higher.

“Still, the economy will struggle to gain momentum while interest rates are as high as they are. That means 2024 will be a tale of two halves.”