The Times Australia
The Times World News

.

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

Times Magazine

DIY Is In: How Aussie Parents Are Redefining Birthday Parties

When planning his daughter’s birthday, Rich opted for a DIY approach, inspired by her love for drawing maps and giving clues. Their weekend tradition of hiding treats at home sparked the idea, and with a pirate ship playground already chosen as t...

When Touchscreens Turn Temperamental: What to Do Before You Panic

When your touchscreen starts acting up, ignoring taps, registering phantom touches, or freezing entirely, it can feel like your entire setup is falling apart. Before you rush to replace the device, it’s worth taking a deep breath and exploring what c...

Why Social Media Marketing Matters for Businesses in Australia

Today social media is a big part of daily life. All over Australia people use Facebook, Instagram, TikTok , LinkedIn and Twitter to stay connected, share updates and find new ideas. For businesses this means a great chance to reach new customers and...

Building an AI-First Culture in Your Company

AI isn't just something to think about anymore - it's becoming part of how we live and work, whether we like it or not. At the office, it definitely helps us move faster. But here's the thing: just using tools like ChatGPT or plugging AI into your wo...

Data Management Isn't Just About Tech—Here’s Why It’s a Human Problem Too

Photo by Kevin Kuby Manuel O. Diaz Jr.We live in a world drowning in data. Every click, swipe, medical scan, and financial transaction generates information, so much that managing it all has become one of the biggest challenges of our digital age. Bu...

Headless CMS in Digital Twins and 3D Product Experiences

Image by freepik As the metaverse becomes more advanced and accessible, it's clear that multiple sectors will use digital twins and 3D product experiences to visualize, connect, and streamline efforts better. A digital twin is a virtual replica of ...

The Times Features

Italian Street Kitchen: A Nation’s Favourite with Expansion News on Horizon

Successful chef brothers, Enrico and Giulio Marchese, weigh in on their day-to-day at Australian foodie favourite, Italian Street Kitchen - with plans for ‘ambitious expansion’ to ...

What to Expect During a Professional Termite Inspection

Keeping a home safe from termites isn't just about peace of mind—it’s a vital investment in the structure of your property. A professional termite inspection is your first line o...

Booty and the Beasts - The Podcast

Cult TV Show Back with Bite as a Riotous New Podcast  The show that scandalised, shocked and entertained audiences across the country, ‘Beauty and the Beast’, has returned in ...

A Guide to Determining the Right Time for a Switchboard Replacement

At the centre of every property’s electrical system is the switchboard – a component that doesn’t get much attention until problems arise. This essential unit directs electrici...

Après Skrew: Peanut Butter Whiskey Turns Australia’s Winter Parties Upside Down

This August, winter in Australia is about to get a lot nuttier. Skrewball Whiskey, the cult U.S. peanut butter whiskey that’s taken the world by storm, is bringing its bold brand o...

450 people queue for first taste of Pappa Flock’s crispy chicken as first restaurant opens in Queensland

Queenslanders turned out in flocks for the opening of Pappa Flock's first Queensland restaurant, with 450 people lining up to get their hands on the TikTok famous crispy crunchy ch...