Anaemic economic growth sets the scene for election battleground

The Australian economy is suffering the sort of anaemic growth that is threatening to undercut the Albanese government’s claim to be solid economic managers.

Thanks to interest rates forcing consumers to choose between mortgages and rents or spending on discretionary goods, the government now faces the daunting task of reviving the economy, considered a critical element in assisting Labor’s re-election chances next year.

The latest National Accounts from the Australian Bureau of Statistics showed Australia’s economy fared better than some expected in the June quarter as government spending and immigration fuelled growth, with economic activity expanding 0.2 per cent, bringing it to 1 per cent for 2023-24. However, it was also the weakest rate of annual growth Australia has recorded in years. Excluding the COVID-19 pandemic period, annual economic growth was the lowest since 1991-92, the year that included the gradual recovery from the 1991 recession.

People are spending and saving less, and NSW suffered worst of all. Household spending fell 0.2 per cent, with NSW down by 0.6 per cent, while it dropped 0.3 per cent in the ACT and South Australia, 0.2 per cent in Tasmania and by 0.1 per cent in Victoria. Total domestic economic activity in NSW fell by 0.4 per cent, the nation’s biggest drop, due to a 3.8 per cent drop in public infrastructure spending.

Treasurer Jim Chalmers’ weekend comment that high interest rates were “smashing the economy” sparked Coalition criticism that he was blaming Reserve Bank of Australia Governor Michele Bullock, but he admitted yesterday that the economy had barely grown through the quarter.

“I think the comments I made on Sunday, and I know they’ve attracted a lot of attention, were just a statement of fact. They have been borne out again in the national accounts. If you look at the way our economy is slowing and the particular pressures on our economy, it is a combination of global economic uncertainty, persistent but moderating inflation and higher interest rates, and I don’t think that is an especially controversial point to make,” he said.

But there is no running away from the fact that these are the weakest figures in 33 years. So far, Australia has avoided slipping into recession thanks to population growth from immigration fuelling the job market and government spending. Meanwhile, consumers have borne the brunt, with GDP per capita down for the sixth consecutive quarter, falling 0.4 per cent. The political gloss on the young-gun Chalmers is well and truly coming off.

Should household expenditure continue to fall it would undoubtedly impact businesses. The recent companies reporting season showed many companies providing consumer goods were already experiencing drops in revenue and profits.

The latest national account figures inspired the opposition to claim the economy had been in a household recession for 18 months. A national recession may not be that close, but with Australian households feeling the pain the Albanese government will have a hard time explaining its handling of the economy to consumers and electors.

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