The Australian economy’s growth has slowed significantly, recording a mere 0.3 per cent increase in the September quarter and 0.8 per cent over the year, which is below both historical averages and market expectations. According to Treasurer Jim Chalmers, while growth is technically positive, it is frail, primarily due to high interest rates, rising living costs, and global uncertainties. Notably, per capita growth declined by 0.3 per cent.
Household spending has stagnated, failing to respond to recent tax cuts and wage growth, with household consumption increasing only 0.4 per cent over the year. Contrary to expectations, discretionary spending has decreased by 1.1 per cent, attributed to soaring interest costs that have tripled since rate hikes began prior to the election.
These figures have raised concerns about demand, revealing it to be weaker than anticipated. The Reserve Bank of Australia (RBA) has indicated that any reduction in the cash rate from the current 4.35 per cent will depend on observing a significant and sustained decline in inflation over several quarters, highlighting ongoing economic challenges.