GDP at slowest growth rate since COVID-19

Australia’s gross domestic product (GDP) rose by 0.1 per cent during the March quarter of 2024 and 1.1 per cent since the same period in 2023 (seasonally adjusted, chain volume measure), the Australian Bureau of Statistics (ABS) has revealed.

This has revealed a further slowing in the GDP when compared to the previous quarter’s growth of 0.2 per cent and 1.5 per cent from December 2022 to December 2023.

ABS head of national accounts Katherine Keenan said: “GDP growth was weak in March, with the economy experiencing its lowest through the year growth since December 2020.

“GDP per capita fell for the fifth consecutive quarter, falling 0.4 per cent in March and 1.3 per cent through the year.”

Reacting to the data, Westpac's economics team stated that the annual pace of growth is "well below trend and the slowest outside of recessions and the major shocks of the pandemic and the GFC".

This has represented the lowest growth in the GDP in over 30 years outside of the COVID-19 pandemic.

"It is particularly weak given the current strong pace of population growth, running at 2.4 per cent per year. Australia has now recorded four consecutive quarters of declining per capita GDP," Westpac's economics team added.

Commonwealth Bank of Australia’s (CBA) head of Australian economics Gareth Aird said the slowdown in GDP growth is “by design and not default”.

“The economy ran too hot coming out of the pandemic and was operating above its capacity. But that picture has changed,” he said.

“More specifically, we believe the positive output gap has now closed and a negative output gap will slowly emerge over the remainder of 2024 and into 2025.”

Aird added that the Reserve Bank of Australia’s (RBA) aggressive rate hiking cycle has “clearly worked to slow demand growth in the economy”.

“Rising mortgage payments along with a lift in tax payable and the effects of elevated inflation have weighed on household purchasing power. And the tailwind of pent-up savings on consumer spending has largely run its course,” Aird said.

Indeed, household spending rose 0.4 per cent during the quarter (1.3 per cent annually) driven by essential categories such as electricity, health, rent, and food, according to the ABS.

Blair Chapman, ANZ senior economist, said this “solid” quarterly increase is “likely to raise most eyebrows”.

“Household spending, while still weak, isn’t as weak as we’d expect,” Chapman said.

“Overall, we see little in this release that would change our view on the RBA or the general outlook for the economy.

“The pace of GDP growth over the past six months is a little weaker than we anticipated, but labour market conditions have only eased slowly over the same period while recent inflation data have shown some stickiness.”

The household saving-to-income ratio declined to 0.9 per cent from 1.6 per cent quarter on quarter as the rise in nominal household consumption outpaced growth in gross disposable income, the ABS stated.

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Adrian Suljanovic is a journalist at Broker Daily with more than two years experience reporting on all facets of the third party distribution channel.

Adrian has written for a range of business and finance titles including IFA, Investor Daily and Lawyer’s Weekly before joining the mortgages team in 2022.

He graduated from the University of Wollongong in 2021 gaining a Bachelor of Communication & Media with a major in Digital & Social Media.

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