Economic growth hits near standstill

Australia’s GDP growth was brought to a near-standstill in the first three months of 2024, as crunched household budgets, squeezed corporate profits and weakened terms of trade weighed on the economy.

In real terms, Australia’s gross domestic product expanded by just 0.1 per cent in the March quarter, cutting annual growth to 1.1 per cent from 1.5 per cent in December, the Australian Bureau of Statistics said on Wednesday.

The result is the weakest annual GDP growth figure recorded outside Covid since the dot.com bust and introduction of the GST in 2000.

In the three months to March, household spending grew by just 0.4 per cent, as budgets were increasingly devoted to spending on essential goods and services, including electricity, fuel and rent.

Falling export values, including key commodities like iron ore and coal, coupled with surging imports for consumer goods like medicines and clothing, also led to a sharp deterioration in Australia’s terms of trade, further weighing on growth.

GDP per capita, a measure for living standards, slipped a further 0.4 per cent across the quarter, marking four consecutive quarters where population growth has outstripped an expansion in the economy.

Sean Langcake, head of Macroeconomic Forecasting for Oxford Economics Australia, said despite “meagre” GDP growth there were “some signs of life’ in household spending – partially because of Taylor Swift and Pink.

“Growth in spending continues to be concentrated in essential components like utilities and health,”

“But discretionary spending also increased in (the quarter) due to increased activity around major concerts and sporting events, along with an increase in travel activity.”

Private investment activity was underwhelming, while net exports were “a substantial drag” on growth.

But Mr Langcake said the worst could be over although growth was likely remain below trend for the rest of the year.

“We think economic momentum is likely at its nadir, and expect an improvement in conditions over the second half of the year as tax cuts boost consumer spending.”

More to come.