Australia's economy grew by 0.2 per cent in the June quarter, and 1 per cent over the last year, according to the Australian Bureau of Statistics (ABS).

It is the weakest rate of annual growth Australia has recorded in years, in seasonally adjusted terms.

Excluding the COVID-19 pandemic period, the annual rate of economic growth is now the slowest since 1991-92, the year that included the gradual recovery from the 1991 recession.

Treasurer Jim Chalmers warned this week that the Reserve Bank's 13 interest rate rises were "smashing the economy".

But the RBA's latest forecasts anticipated that Australia's economy would record an annual growth rate of 0.9 per cent in the June quarter, as a consequence of its attempt to squeeze inflation out of the economy with higher interest rates.

Callam Pickering, APAC economist at global job site Indeed, said the growth rate in June was "depressing but also expected".

He said economic activity per person was still deteriorating significantly.

"Hampered by cost-of-living pressures and high interest rates, the economy continues to be propped up by government spending and population growth," he said.

"For the sixth consecutive quarter, Australian economic activity declined on a per capita basis and the 1.5 per cent decline over the past year is the largest Australia has experienced in 33 years, excluding the pandemic.

"That's why it feels like a recession for many Australians, despite economic growth remaining positive and unemployment relatively low," Mr Pickering said.

Weakness in consumer spending a 'big surprise'

With high inflation and high interest rates keeping some households under immense pressure, economic growth in the June quarter was being driven by increased spending by governments and foreign students and visitors.

Household consumption took a battering.

Westpac senior economist Pat Bustamante said the exceptional weakness in consumer spending in the quarter was a "big surprise."

"We are seeing increasing signs that the weakness in consumer spending is spilling over into business, particularly those at the coalface of the consumer-led slowdown, with new business investment up just 0.1 per cent in the June quarter.

"In stark contrast, total new spending by governments continues to grow strongly and is now at a record share of the economy [27.3 per cent of GDP, from a previous peak of 27.1 per cent of GDP in the September quarter 2021]," he said.

See the graphic below.

Sydney fruit shop owner Max Filipe has been in the food retail industry since 1985 but says he's "never seen things this tough before".

As inflation has risen, so has the cost of running his business, with the prices of fuel, wages, rents and electricity all going up and impacting his margins.

"Everything to do with the running of the business has gone up tremendously," he said.

He said he has survived a lot of recessions but described the current climate as "the worst" he's seen.

"The biggest cost … is perhaps making sure that customers get value for money at a minimum possible cost, without the business going broke," he said.

"Margins are the lowest I ever seen but we are resilient. I'm optimistic."

But Mr Felipe is not the only one doing it tough.

Shoppers hunting for more discounts

Sisters and business owners Katie and Maggie Quach say many people are now visiting their store to look for hard bargains.

The pair founded a discount food shop in Sydney called Beyond Best Before.

They buy food from big retailers that's about to reach its best before date at a very cheap price, and then sell that food to customers at a discounted rate.

"Customers are coming to us, and they're open to the idea of consuming products past their best before date, or having a shorter shelf life than they would expect at your standard supermarket," Katie told the ABC.

The sisters say they redirect surplus food as well as unsold products that have been rejected from the big supermarkets because it's either close to, or just after, their best before date.

"We offer them up to 70 per cent, sometimes even 80 per cent off, which means great savings as well as great for the environment," Katie said.

The June quarter GDP figures show aggregate consumption went backwards and discretionary spending has fallen as consumers grapple with high interest rates and stubbornly high inflation.

With many households doing it tough, customers are having to get more savvy about their purchases and are hunting for discounts.

The sisters said what they have observed is customers who come into the store have "a greater focus on affordability and value for money".

The Reserve Bank anticipated this economic slowdown

However, since the slowdown in economic activity is tracking in line with the RBA's forecasts, economists say the RBA Board won't be making any sudden interest rate moves after Wednesday's numbers.

At the moment, underlying "trimmed mean" inflation is running at an annual pace of 3.8 per cent, which is above the RBA's 2-3 per cent target range.

The RBA expects that number to keep falling to 3.5 per cent by the end of this year, and to 3.1 by June next year.

Krishna Bhimavarapu, APAC economist at State Street Global Advisors, said the continuing slowdown in economic growth was the "clearest indication yet" that monetary policy was restrictive enough in Australia.

"This data should at the very least lead the RBA to make a dovish pivot, considering how uncertain they were during the last meeting," she said.

"We still look for the first rate cut in November as headline CPI [inflation] could ease to around 3 per cent in the third quarter."

Tony Sycamore from IG said despite the RBA's recent warning that it may still have to lift interest rates, markets doubted that would happen.

"The interest rate market still expects the RBA's next move to be a rate cut, with 23 basis points of rate cuts priced by year-end and a cumulative 56 basis points of cuts by April 2025," he said.