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Australia’s GDP growth for the second quarter of CY23 has surpassed estimates, albeit by a narrow margin.
During the three-month period from April to June, Australia’s GDP grew by 0.4 per cent, versus expectations of 0.3 per cent.
“Australia’s recent productivity malaise showed no signs of abating in Q2, with GDP per hour worked contracting by a sharp two per cent q/q,” Oxford Economics Head of Macroeconomic Forecasting Sean Langcake said.
“Coupled with strong growth in compensation of employees due to tightness of the labour market, upward pressure on labour costs persists.
“While inflation has peaked, this will be a lingering cause for concern for the RBA.”
GDP actually rose 3.4 per cent in 2022-23 – above the ten-year pandemic average of 2.6 per cent.
This comes off a low base, however, driven by Delta-strain lockdowns.
“Through the year, growth was lower at 2.1 per cent,” the ABS wrote.
And while the GDP read beat estimates, it only beat those estimates by 0.1 per cent – in the grand scheme of things, a flattish gain.
And then there’s the zoomed-out view. Nominal GDP actually fell 1.2 per cent as the country clocked the largest quarterly fall in the terms of trade since June 2009.
This was largely due to lower commodity prices year-on-year which pushed the terms of trade down 7.9 per cent.
A warmer northern hemisphere winter ultimately saw less demand from that region for Australian coal and LNG. Iron ore price decreases borne from a struggling China also hit the country’s coffers.
Still, we’re an export nation, and exports remained the largest growth driver – along with investment.
“Capital investment and exports of services were the main drivers of GDP growth this quarter,” ABS Head of National Accounts Katherine Keenan said.
“This was the seventh straight rise in quarterly GDP, and annual growth remained above trend, reflecting the absence of significant COVID-19 disruptions, such as lockdowns, in 2022-23.”
Exports rose 4.3 per cent quarter-on-quarter.
But what about the consumer? Household spending slowed further in Q2 CY23, though, in a flattish fashion – it decreased only 0.1 per cent.
The ABS pointed to household budgetary pressures, inflation and interest rate rises.
Discretionary spending, however, fell a larger 0.5 per cent, the third consecutive quarterly fall. Some analysts have already coined the term “discretionary recession.”
Recreation and culture, as well as household equipment, led the fall. Transport, and hotels and cafes and restaurants, both continued to increase, but at a slower pace. Worth remembering is that the FIFA Women’s World Cup pushed up the recreation and culture data.
But of concern is the Australian household saving ratio, which declined yet again from 3.6 per cent to 3.2 per cent – record lows.
The country’s ratio has continued to dwindle even as consumers remain surprisingly resilient, which can be seen most of all in the travel sector.
Recent data from the US suggested Americans are continuing to spend from their savings, an unsustainable situation – and if that read on the data is correct, it looks like Australians are doing the same.
“With US excess savings built up during the pandemic now run down by around 75 per cent, the jobs market slowing, and the reopening boost behind us – it’s unclear how long consumer spending on goods and services in particular can continue to remain above their pre-pandemic trends,” AMP’s Chief Economist Shane Oliver wrote last week.
