Add Category
Australia's economy grew 0.2 per cent in the first three months of 2023, according to the Bureau of Statistics (ABS).
Key points:
- The economy is growing at an annual rate of 2.3 per cent, down from 2.7 per cent
- The household saving ratio has fallen to its lowest level in nearly 15 years
- Higher interest rates and the rising cost of living are hindering people's ability to save
It means the economy is now growing at an annual rate of 2.3 per cent, down from 2.7 per cent at the end of 2022, signalling a marked slowdown in economic activity.
Economists were expecting a higher growth rate.
"This is the sixth-straight rise in quarterly GDP but the slowest growth since the COVID-19 Delta lockdowns in September quarter 2021," Katherine Keenan, the head of National Accounts at the ABS, said.
The household saving ratio fell to 3.7 per cent in the March quarter, from 4.4 per cent.
It is sitting at the lowest level since the June quarter 2008, which was during the global financial crisis.
The fall in the rate of saving has been driven by rising interest payments on mortgages and higher prices for goods and services.
"The household saving ratio fell to its lowest level in nearly 15 years," Ms Keenan said.
GDP per capita declines, housing investment declines
Looking beneath the headline rate of growth, the level of economic activity per person deteriorated across January, February and March.
Population growth outpaced economic growth, so GDP per capita - which measures the amount of economic activity per person - fell by 0.2 per cent in the March quarter.
In the September and December quarters of last year, GDP per capita grew by 0.1 per cent, so it was already weak.
Housing investment also declined in the March quarter.
It fell by 2 per cent, driven by a fall in ownership transfer costs (-5 per cent) reflecting lower levels of property market activity following the Reserve Bank's rapid rate hikes.
Dwelling investment fell by 1.2 per cent as demand for renovation work declined.
New and used dwelling activity also fell despite an existing pipeline of work, as ongoing labour shortages caused project delays and extended completion times.
However, business investment increased by 3.4 per cent in the March quarter, particularly in purchases of machinery and equipment driven by the manufacturing, transport and mining industries.
Treasurer says slowdown is not surprising
Treasurer Jim Chalmers said the slowdown in economic activity showed the impact of higher interest rates and a slowing global economy.
"The rise in interest rates is clearly biting," he said on Wednesday.
"We see that in the number because households are pulling back on spending, they are saving less and paying more in interest.
"Household consumption eased for the third quarter in a row, it grew by just 0.2 per cent in the quarter and that's because households pulled back on discretionary spending to make room for the essentials in their household budget."
However, he said it was notable that wages had increased, even though they were being outstripped by inflation.
"One of the pleasing aspects of these numbers is that household incomes grew solidly in the quarter at the same time as price pressures in the economy were moderating," he said.
"If you look at the wages and salaries number, it rose by 2.4 per cent in the quarter and 10.8 per cent over the year and that's because more Australians are in jobs."