Australian economic growth can't be rushed

The Australian economy grew 0.3% in the March quarter and by 2.5% over the year. Once again, GDP per capita fell in the quarter. GDP per capita has recorded only four quarters of positive growth since mid-2022, and remains below its peak from almost four years ago.

This is now the longest per capita recession (a period of lower GDP per capita) in the 65 years of quarterly GDP data, outlasting the significant recessions of  the early 1990s (1989-1992) and early 1980s (1981-1984). While this has been a mild downturn – GDP per capita only fell 1.5% below its peak – growth has been anaemic for several years.

The strongest contribution to growth in the quarter came from business investment. This was largely investment in data centre machinery and equipment which is predominantly imported. As a result, while business investment made a large positive contribution, net exports made a large negative contribution to growth. Net exports were also suppressed in the quarter by adverse weather affecting mining production and exports. Public spending made little contribution to growth in contrast to the recent past

Over the past year growth was more balanced with significant contributions from household consumption, business investment and public spending, offset by very strong growth in imports exceeding quite strong growth in exports. Dwelling investment made only a small contribution to growth as the construction sector made insufficient progress towards the Government’s target of 1.2 million new homes.

Household consumption grew 2.5% over the year, just a touch below its long-run average. Household saving ticked down in the quarter to 6.2%, in line with its average since the Global Financial Crisis, excluding the pandemic period. Household real disposable income per capita could only eke out 0.3% growth in the quarter.

Once again productivity disappointed, with GDP per hour worked falling 0.6% in the quarter. Since 2018, annual productivity growth has averaged just 0.1%. This is the heart of Australia’s weak growth, businesses and workers just aren’t getting more efficient. Until we do, we’ll remain stuck in the low growth funk.

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