Australia’s economic growth slows in March quarter despite rise in household spending

Australia’s economic growth slowed in the March quarter as rising spending by households, companies and governments couldn’t counter a dive in web exports.

In the primary three months of 2022, gross home product rose to an annual charge of three.3%, the Australian Bureau of Statistics stated. That eased from the sooner reported annual tempo of 4.2% and in contrast with about 3% forecast by economists.

The quarterly charge of growth was 0.8% reaching a report $527.7bn, and marked the second consecutive quarter of enlargement. Wages confirmed a pick-up whereas a number of inflation measures rose, one to the best in 34 years, stoking considerations that the Reserve Bank of Australia must hike rates of interest quicker and sooner to curb inflation.

The GDP growth tempo was anticipated to gradual after the ABS reported on Tuesday that the nation’s present account surplus had shrunk by $5.7bn to $7.5bn in seasonally adjusted phrases for the quarter, shaving 1.7% off total growth alone.

Domestic closing demand, although, contributed 1.6 proportion factors to GDP growth, with households making up half of that. Government spending delivered 0.6 proportion factors of growth, pushed by additional spending on well being and flood reduction in New South Wales and Queensland, the ABS stated. Business, too, added to their shares.

“Household consumption continued to drive growth this quarter,” stated Sean Crick, the appearing head of nationwide accounts on the ABS. “Following the easing of Covid-19 restrictions, household spending on transport services, hotels, cafes and restaurants, and recreation and culture increased.”

The quarterly GDP numbers are the primary main economic figures to be launched because the Albanese Labor authorities took workplace after their 21 May election victory.

The March knowledge offered a snapshot of the momentum of the economy that the incoming ministers inherited. It additionally confirmed worth pressures had been mounting in the beginning of the yr, supporting the case for an additional rise in official rates of interest when the RBA board meets subsequent Tuesday.

The new treasurer, Jim Chalmers, stated the figures had been a glimpse of the “economic mess” Labor had inherited from the Morrison authorities.

“Skyrocketing inflation is a big challenge, falling real wages is a big challenge, and the impact of interest rate rises that the Reserve Bank governor [Philip Low] has flagged is a big challenge,” he stated.

“Even where some of these numbers on the surface might be pleasing compared to some of the diabolical numbers we’ve had over the last couple of years, they’re still short of what the former government was hoping for.”

Australia dealing with ‘perfect storm’ in power market

Among the deviations from the pre-election fiscal outlook ready by treasury was a quarterly GDP growth tempo of 0.8%, in contrast with 1.8%, Chalmers stated. Similarly, new enterprise funding at 1.4% was about half the forecast 2.7%, whereas exports shrank 0.9% versus the 4.2% growth predicted in the outlook.

Not captured by Wednesday’s nationwide accounts was the emergence of “a perfect storm of conditions and challenges in our energy market”, Chalmers stated, referring to hovering wholesale electrical energy and gasoline costs, which have already compelled some market caps to be launched and retailers to turn away customers.