Australia’s economic growth, as measured by the ABS-compiled chain volume GDP statistics that adjust for price increases, rose by a 0.6% in the December 2024 quarter, to be a 1.3% higher on an annual (through the year) basis. This annual movement was in the ball-park of market expectations, and a definite improvement on the mediocre 0.8% annual gain reported in the prior quarter.
Digging deeper, many parts of the Australian economy managed at least some growth over the final quarter of calendar year 2024.
Household spending was up 0.4 per cent in the December 2024 quarter, after treading water in the prior 3-month period. The ABS head of national accounts Katherine Keenan noted that expenditure on essentials such as rent and health – which continue to feature prominently in cost of living related discussions – were big contributors to the gain reported in household spending. The stats also indicated that our retailers got a nice little kicker from consumers opening their wallets during the Black Friday and Cyber Monday sales – although some consumer discretionary groups have subsequently indicated that their Boxing Day and New Year sales were underwhelming (a case of watch this space!)
Growth in government spending was 0.7 per cent higher in the December 2024 quarter. While this was down a bit on the big gains seen in prior quarters, government spending jumped by 5.1% on a December-on-December basis, meaning calls by many market commentators for governments to wind back their spending levels will remain audible. Public sector investment also continued to trend higher, rising by a healthy 1.8 per cent in the December quarter.
Private investment advanced 0.3 per cent in the December 2024 quarter, powered by increases across its new engineering, electricity generation and distribution projects, and mining investment categories. However, on a down note, private investment in dwellings was a material drag on headline private investment, slipping by 0.4 per cent in the latest quarter, as ongoing price and labour pressures failed to dissipate.
Even the net trade (exports less imports) component of our GDP made a small positive growth contribution, underpinned by higher exports of goods and services.
The performance of other closely watched GDP components were a proverbial mixed bag.
In a minor boost for household finances at the aggregate level, the household savings ratio rose modestly to 3.8 per cent in the December 2024 quarter, up from 3.6 per cent in the September quarter, aided in part by higher wages.
However, in a clear-cut downer, productivity measures in the December 2024 quarter GDP report gain underwhelmed. The GDP per hour worked metric fell for a third successive quarter. It is now 1.2% lower on an annual basis – Australia’s business sector will not be pleased!
With the December 2024 quarter GDP data as a package broadly in line with market expectations, they caused minimal movement in our money, bond and share markets. The stats are certainly not expected to have much sway on the RBA’s current thinking on the future direction of Australian short-term interest rates – most economists expect the RBA to sit pat on rates at its next meeting on 1 April. Investors can now return to fretting about how trade wars and currently re-igniting geopolitical concerns will impact the future direction of financial markets both here and overseas.
Source: ABS and The Sentiment
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