Australian economic system: New GDP figures reveal we’re | Australian Markets
For the primary time in two years, Australia is no longer in a per capita recession.
Official figures launched by the Bureau of Statistics revealed the economic system grew by 0.6 per cent within the last quarter of 2024, bringing the annual growth fee to 1.3 per cent.
On a per capita foundation, GDP is now growing at 0.1 per cent, the primary increase after seven successive quarters of declines, whereas the quarterly GDP growth of 0.6 per cent is the strongest displaying in more than two years.
Treasurer Jim Chalmers mentioned it was “more evidence our economy has turned a corner”.
“This is looking more and more like the soft landing we have been planning and preparing for,” Dr Chalmers mentioned.
“Inflation is down, incomes are strengthening, unemployment is very low, interest rates are coming down and now growth is picking up as well.”
The ABS mentioned each public and personal expenditure contributed to the growth, supported by an increase in exports of items and companies, which have been boosted by a stimulus-induced rise in exports of iron ore to China alongside robust demand for liquid natural gasoline and agricultural items.
Authorities spending continues to do the heavy lifting within the economic system, surpassing the the public sector to file 27.5 per cent of GDP, beating the earlier file high within the third quarter of final 12 months.
Whereas growing at half the speed of the earlier two quarters, state and federal consumption continued to develop, growing 0.7 per cent as a result of value of residing assist, public sector wages and the growth of health, youngster and aged care.
Federal polices supporting the care economic system, reminiscent of wage rises for aged care and youngster care staff, are flowing by way of to States which have now recorded a 5 per cent growth in outlays for the 2024 calendar 12 months.
“Strength in hiring across the health, education, policing, and environment agencies” on the native and state degree was the “largest contributor” to whole authorities expenditure, the ABS mentioned.
Public infrastructure expenditure additionally grew by 1.8 per cent for the quarter as a result of state investment in public transport, roads, water and renewable vitality in addition to Commonwealth spending on telecommunications and energy technology.
The ABS additionally revised up infrastructure expenditure for the earlier quarter from 6.3 per cent to eight per cent, including to an unusually massive quarter of spending pushed by imports of defence gear and investment in hospital and street initiatives.
Deloitte Entry Economics companion Stephen Smith mentioned whereas the indicators of growth in family consumption was optimistic, authorities spending was nonetheless doing the heavy lifting.
“We are still reliant on public spending, we need private activity to play a larger role,” Mr Smith mentioned.
“We can’t continue to rely on public spending to prop up economic activity and need policy changes to encourage investment including substantial tax reform, changes in competition policy and greater incentives to invest and start a business.”
Non-public sector exhibits indicators of life
The personal sector recorded a rise of 0.3 per cent after two quarters of zero growth however continues to say no on a per capita foundation given population growth of 2.2 per cent.
Family consumption was, nevertheless a vibrant spot, growing by 0.4 per cent for the quarter, as customers snapped up Black Friday reductions. Spending was supported by a 2 per cent increase in wage income and a discount in taxes. An increase within the family financial savings fee to three.8 per cent from 3.6 per cent, nevertheless means that cautious customers are nonetheless banking financial savings.
“Given population growth, the boost to household spending is far from impressive, but given recent headwinds, the shift in consumer behaviour is notable,” mentioned Certainly APAC economist Callam Pickering
“It indicates that Australian households aren’t quite as stretched financially as they used to be, at least not collectively. A full recovery from the recent cost-of-living crisis may take 5 to 10 years, but the December quarter marked the first step.”
Enterprise investment additionally rose barely, up 0.3 per cent as a result of mining and renewable initiatives. The growth in that sector was offset by a decline in dwelling investment as a result of a pull-back in renovations.
Enterprise income additionally rebounded after 18 months of contraction, led by the mining sector which rising iron price as a outcome of Chinese language stimulus, whereas the transport and financial sector additionally loved revenue rises.
Australian Chamber of Commerce and Business chief govt, Andrew McKellar mentioned the improved outlook for business was a welcome development however more confidence was needed, warning that the stagnant degree of investment in plant and gear indicated companies stay cautious of future circumstances.
“Thanks to growth in household consumption, private demand has made a significant contribution to economic growth,” Mr McKellar mentioned.
“Exports have seen an increase and after a lacklustre couple of quarters private investment is also up, so most of the signs point to an economy that is on the improve and we welcome that.”
The GDP figures might be carefully watched by the Reserve Financial institution, who reiterated this week that the choice to cut charges was hotly contested and warned the market that it was too optimistic on additional fee cuts.
Talking at a business perform this morning, RBA deputy governor Andrew Hauser mentioned the “extraordinarily strong” growth in employment was a key space of focus and the Board was struggling to find out whether or not such a robust labour market could be inflationary in a period of low growth.
“While the recent strength in employment growth is welcome, it’s also unusual after a period of such subdued GDP growth. The question is what it means for the margin of spare capacity in the economy, and hence for the inflation outlook,” Mr Hauser mentioned.
One of the RBA’s considerations could be the persevering with low degree of productiveness, which the ABS knowledge confirmed declined by 1.2 per cent in phrases of GDP per hours labored. Productiveness within the workforce is a key determinant of the RBA’s inflation outlook.
“Australian workers are no more productive today than they were nine-years ago,” Mr Pickering mentioned. “Australia’s dismal productivity performance is a major economic problem and one that few people are talking about.”
Nationwide Australia Financial institution mentioned it didn’t anticipate right now’s knowledge to change the outlook on rates of interest, and forecast the economic system ought to return to pattern growth of 2.25 per cent by the tip of the 12 months.
The bank mentioned it was nonetheless forecasting a fee cut in Could and rates of interest to fall to three.1 per cent subsequent 12 months.
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