June 5th 2024.
Australia's economy is facing some tough times ahead. Recent data from the Australian Bureau of Statistics has shown that the country's gross domestic product (GDP) only grew by 0.1 per cent in the first three months of the year. This is the lowest quarterly growth since September 2020, when the economy actually went backwards. According to Katherine Keenan, the head of national accounts at the ABS, this weak growth is a cause for concern. She noted that this is the lowest year-on-year growth since December 2020.
Many economists were expecting this kind of result, with Reserve Bank Governor Michele Bullock even stating earlier today in a Senate estimate hearing that she didn't anticipate any significant growth in GDP. She acknowledged that the economy is currently in a very weak state, with people cutting back on non-essential spending. However, she also pointed out that the labor market is still growing, which is an important factor to consider. While the unemployment rate is gradually increasing, employment is still on the rise.
The tough economic climate is also reflected in the savings habits of Australians. On average, households only saved 0.9 per cent of their income during the March quarter, which is a significant decrease from the 1.6 per cent saved in December. This is the first time in over a decade that savings have remained below 2 per cent for an entire year, with the last time being during the Global Financial Crisis in March 2008. Keenan noted that the growth in household income was also at its lowest rate since December 2020, largely due to small increases in employee compensation and investment income.
One of the main reasons for the weak economy is the decrease in discretionary spending by individuals. This is understandable given the current state of the economy, but it has contributed to the overall slow growth. Despite these challenges, there is still some hope as the labor market continues to grow. However, it is clear that Australians are facing tough times and will need to be cautious with their spending in order to weather the storm.
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