Australia’s economic growth, as measured by the ABS-compiled chain volume GDP statistics that adjust for price increases, rose by a paltry 0.3% in the September 2024 quarter, to be just 0.8% higher on an annual (through the year) basis. The markets were expected Australia’s quarterly economic growth increase to be around 0.5% in the latest quarter.
And things could have been worse. A negative quarterly print would have been reported in the latest quarter but for solid growth contributions from Australia’s government sector.
Government consumption increased 1.4%. State and local general government expenditure (+2.2%) led the rise as additional state-based energy bill relief schemes were implemented in the quarter. The Federal energy bill relief fund was also extended and expanded from July 2024. General government investment rose powered by imports of defence equipment and investment in hospital and road projects.
Stronger public sector spending and investment ensured that the public sector supported overall domestic demand – both the government expenditure and public investment components each contributed +0.3 percentage points to September quarter GDP (see the table accompanying this article).
Private investment edged 0.1% higher in the latest quarter, underpinned by dwelling construction through improvement in work done on new home commencements.
The all-important private sector consumption component of GDP was unchanged in the September quarter as consumers remained cautious in the face of ongoing cost of living pressures. The abovementioned energy bill relief schemes effectively trimmed consumer spending. However, consumers were in no rush to redirect the savings from these schemes into other expenditures – perhaps they were saving up for the following quarter’s Black Friday sales, which were, on all reports, quite strong!
Indicative of the tighter financial situations now confronting many Australians at the current time, the household savings ratio accompanying the GDP release was 3.2% in the September quarter. At least the latter measure was up on its prior quarter reading of 2.4%, as growth in gross disposable income outpaced growth in nominal household consumption.
Net trade contributed 0.1 percentage points to GDP growth, as imports (-0.3%) fell and exports (+0.2%) rose over the September quarter.
The relatively soft GDP data will undoubtedly see renewed calls by some for the RBA to start reducing its benchmark interest in early calendar 2025. However, the bank will likely argue that ongoing robust government spending levels give it good reason to stay in a holding pattern as its preferred inflation measures remain above target levels.
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