The Times Australia
Monday, April 7, 2025 6:42:06 AM
The Times World News

.
The Times Real Estate

.

We're in a per capita recession as Chalmers says GDP 'steady in the face of pressure'

  • Written by Isaac Gross, Lecturer in Economics, Monash University

Australia’s economy grew a mere 0.4%[1] in the June quarter according to figures released by the Bureau of Statistics today, a performance Treasurer Jim Chalmers describes as “steady in the face of unrelenting pressure”.

The lacklustre growth follows growth of 0.4% the previous quarter, and is a step down from the growth of 0.7% in the quarters that preceded it, presenting a stark reminder of the economic challenges caused by rising interest rates as the Reserve Bank attempts to reign in inflation.

If growth continued at that pace for another two quarters, the annual growth rate would barely reach 1.6%, an alarmingly low figure that. For many Australians it probably feels like a recession, because all of the growth was accounted for by population growth, meaning gross domestic product (GDP) per person fell by 0.3% in both March and the June quarters, in a so-called “per capita recession[2]”.

The driving force behind this tepid growth is primarily weak household consumption which grew by only 0.1% in the quarter – far less than Australia’s population.

Households, grappling with the increased cost of essential expenses such as fuel and rent, have resorted to cutting down on savings.

In the three months to June Australia’s household saving ratio plummeted to 3.2%, its lowest rate in 15 years.

How is it possible to have both weak spending and weak saving at the same time?

The answer is that disposable (post tax) income fell by even more.

Real per capita disposable income fell by 2.1% in the June quarter.

Outside of pandemic lockdown years of 2020 and 2021, this was the biggest fall in disposable income per Australian since the 2009 global financial crisis.

The Bureau of Statistics says mortgage interest expenses have almost doubled over the past year as home building (“dwelling investment”) has slid by 0.2% in the quarter and 1.1% over the year.

In better news, business investment has shown resilience, climbing 0.6% in the quarter, and 3.4% over the year driven, driven in part by a rush of tradies[3] attempting to upgrade their cars before a cut in the instant asset write-off limit came into effect on July 1.

Exports climbed 4.3% in the quarter, driven by “education exports” as international students returned.

Read more: You don't have to be an economist to know Australia is in a cost of living crisis. What are the signs and what needs to change?[4]

Gross operating surpluses, a measure of company profits, fell by 8.6% in the quarter driven by a fall in commodity prices which drove down mining profits.

Pressing on profits were higher wage bills – which surged 9.9% outside of mining, reflecting both wage growth and employment growth, outstripping the 5.1% uptick in non-mining profits.

Lower commodity prices also drove another decline in Australia’s terms of trade which fell by 7.9%. The terms of trade measure the price of Australian’s exports relative to the price of imports, meaning that Australia is getting fewer imports for its exports – something that will inevitably feed into our standard of living.

This subdued economic growth is the primary reason the Reserve Bank decided to hold interest rates constant[5] at its board meeting yesterday.

The bank is expecting economic growth to decelerate to an annual rate of only 0.9%[6] by the end of the year, in large measure because of the series of 12 interest rate rises it has imposed since May last year.

One of the bank’s biggest concerns, and one of the government’s biggest concerns, is labour productivity (GDP per hour worked) which slid a further 2% in the quarter to be down 3.6%[7] over the year.

The bank’s outgoing governor Philip Lowe says falling or weak productivity growth makes wage increases more likely to feed inflation, limiting his freedom to cut interest rates, a point he might address in his final speech as governor on Thursday, to be entitled Some Closing Remarks[8].

Boosting productivity – how much we produce for each hour we work – is important. Our standard of living and the pain we need to inflict to fight inflation will depend on it.

References

  1. ^ 0.4% (www.abs.gov.au)
  2. ^ per capita recession (www.amp.com.au)
  3. ^ rush of tradies (www.afr.com)
  4. ^ You don't have to be an economist to know Australia is in a cost of living crisis. What are the signs and what needs to change? (theconversation.com)
  5. ^ constant (www.rba.gov.au)
  6. ^ 0.9% (www.rba.gov.au)
  7. ^ 3.6% (www.abs.gov.au)
  8. ^ Some Closing Remarks (rba.livecrowdevents.tv)

Read more https://theconversation.com/were-in-a-per-capita-recession-as-chalmers-says-gdp-steady-in-the-face-of-pressure-212642

The Times Features

Maximizing Space in Narrow Lot Homes: Smart Design Solutions

Urban housing markets continue to push homeowners toward smaller, narrower lots as land prices climb and city populations grow. These thin slices of real estate present unique de...

The Australian cast of BACK TO THE FUTURE: The Musical

Producers John Frost, Colin Ingram and the creators of the original film trilogy Robert Zemeckis and Bob Gale are thrilled to announce that Tony Award winner Roger Bart will do...

RCD Installation: Why It's Essential for Electrical Safety

Electricity is a powerful force that powers almost every aspect of our modern lives, but it can also be hazardous if not handled properly. Electrical hazards like electric shocks...

Why a Garage Shed is the Perfect Addition to Your Property

The most straightforward and most wholesome extension for any property. A garage shed is a potential solution for you, whether you are looking for an additional space for storage...

Revitalising Homes Through Strategic Architectural Renewal

Residential window replacement is one of the few home improvement interventions that goes far beyond simple aesthetic upgrades. Door frames and windows constitute these vital archi...

The Benefits of Animal-Assisted Speech Therapy For Children

Speech therapy has long been a standard for supporting children’s communication and emotional development. But what happens when you introduce a furry friend into the process? Th...

Times Magazine

CWU Assistive Tech Hub is Changing Lives: Win a Free Rollator Walker This Easter!

🌟 Mobility. Independence. Community. All in One. This Easter, the CWU Assistive Tech Hub is pleased to support the Banyule community by giving away a rollator walker. The giveaway will take place during the Macleod Village Easter Egg Hunt & Ma...

"Eternal Nurture" by Cara Barilla: A Timeless Collection of Wisdom and Healing

Renowned Sydney-born author and educator Cara Barilla has released her latest book, Eternal Nurture, a profound collection of inspirational quotes designed to support mindfulness, emotional healing, and personal growth. With a deep commitment to ...

How AI-Driven SEO Enhancements Can Improve Headless CMS Content Visibility

Whereas SEO (search engine optimization) is critical in the digital landscape for making connections to content, much of it is still done manually keyword research, metatags, final tweaks at publication requiring a human element that takes extensiv...

Crypto Expert John Fenga Reveals How Blockchain is Revolutionising Charity

One of the most persistent challenges in the charity sector is trust. Donors often wonder whether their contributions are being used effectively or if overhead costs consume a significant portion. Traditional fundraising methods can be opaque, with...

Navigating Parenting Arrangements in Australia: A Legal Guide for Parents

Understanding Parenting Arrangements in Australia. Child custody disputes are often one of the most emotionally charged aspects of separation or divorce. Parents naturally want what is best for their children, but the legal process of determining ...

Blocky Adventures: A Minecraft Movie Celebration for Your Wrist

The Minecraft movie is almost here—and it’s time to get excited! With the film set to hit theaters on April 4, 2025, fans have a brand-new reason to celebrate. To honor the upcoming blockbuster, watchfaces.co has released a special Minecraft-inspir...

LayBy Shopping