The Australian Bureau of Statistics (ABS) has revealed that rising interest rates, ongoing inflation, and worldwide uncertainty have hurt the country’s economy, which managed a meager 0.1% growth in the first quarter of 2024 — its lowest yearly gain since December 2020.
While acknowledging the slow growth, Treasurer Jim Chalmers highlighted Australia’s significant resilience compared to several other OECD nations, ABC reported.
Even if the economic growth was modest, he noted that it was a positive step, given the difficult circumstances at home and abroad.
“The primary cause of this very weak growth was higher interest rates, combined with moderating but persistent inflation and ongoing global uncertainty,” he told ABC. “But any growth is welcome in the domestic and global circumstances we confront.
However, Katherine Keenan, the head of national accounts at ABS, presented a less encouraging picture. She pointed out that the country’s economy has now reached its slowest annual growth since December 2020, while emphasizing that economic activity per person had fallen for the sixth straight quarter, falling by 1.3% for the entire year and by 0.4% in the March quarter.
Based on a sustained per capita fall in the economy, Australia is on the verge of recession, according to Callam Pickering, the APAC economist at Indeed, a worldwide employment site.
“For the fifth consecutive quarter, economic activity declined on a per capita basis and the 1.3% decline over the past year is the largest Australia has experienced in 33 years, excluding the pandemic,” he said.
Pickering emphasized how important population growth was to avert a recession, but he also cautioned that the household sector presented serious threats to the stability of the economy.
“Population growth is the only thing standing between Australia and recession,” he said. “Even a small deterioration in labor market conditions, a reduction in population growth, or even a reluctance to dip into savings could quickly pull the rug out from household spending, leaving the broader economy in a precarious position.”
Any additional worsening in labor market circumstances or unwillingness to spend might deepen Australia’s economic slowdown and drive it closer to recessionary territory. Rising prices and a lowering saving rate are putting pressure on household spending.
For the fifth straight quarter, GDP per capita decreased, highlighting persistent issues. The boost in government expenditure was offset by decreases in both public and private capital investment, which resulted in a muted growth rate overall. GDP growth was also negatively impacted by net trade, as imports exceeded exports.
