The Australian economy grew by 0.3% in the September quarter 2024, marking its twelfth consecutive quarter of growth. According to the Australian Bureau of Statistics (ABS), annual growth reached 0.8%, reflecting a slowdown since September 2023.
Public Sector Drives Growth
Public sector expenditure played a pivotal role in the September quarter’s growth. Government consumption and public investment significantly contributed to the increase.
Public investment rose by 6.3%, reaching the highest level on record. This growth followed three consecutive quarters of decline. General government investment increased by 6%, driven by defence equipment imports and investments in hospitals and roads. State and local public corporations boosted their investment by 8.8%, primarily in renewable energy and roads.
Katherine Keenan, ABS head of national accounts, stated, “The rise in public investment in the September quarter followed three consecutive quarterly falls.”
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Flat Household Spending
Household spending remained stagnant in the September quarter, following a 0.3% decline in June. The largest detractor was electricity and gas spending due to energy bill relief rebates. These rebates shifted expenditure from households to government accounts.
“The rebate-driven fall in household electricity spending was offset by growth in other categories,” Ms Keenan said. She highlighted that clothing and footwear spending increased due to unseasonably warm weather. Essential spending on rent, health, and education services also grew.
Spending by Australian travellers overseas contributed to tourism-related growth. Categories such as hotels, cafes, restaurants, and recreation experienced noticeable increases.
GDP Per Capita Continues to Decline
GDP per capita fell by 0.3%, marking its seventh consecutive quarterly decline. This sustained drop highlights ongoing economic challenges for individual Australians.
Trade and Inventories’ Mixed Impact
Net trade contributed 0.1 percentage points (ppts) to GDP growth. Exports grew by 0.2%, while imports decreased by 0.3%. Goods exports increased by 0.9%, driven by higher demand for coal. Goods imports fell by 1.5%, led by a decline in motor vehicle imports.
However, changes in inventories detracted 0.4 ppts from GDP growth. Inventories fell by $712 million in September, following a $2 billion buildup in June.
Trade in services detracted from growth. Services exports declined by 3.6%, driven by a drop in education-related travel. Meanwhile, services imports rose by 3%, with Australians travelling to distant destinations such as Europe.
Government Spending Supports Disposable Income
Government spending rose by 1.4%, supported by increased social benefits to households. Rebates such as the Energy Bill Relief Fund played a key role.
“Social benefits paid to households increased this quarter as households received energy cost relief rebates,” Ms Keenan said.
Stage 3 tax cuts introduced during the quarter reduced income tax payments by 3.8%. This reduction helped lift gross disposable income by 1.5%, outpacing the 0.6% rise in nominal household spending.
Household Savings Rise
The household saving ratio increased to 3.2% in the September quarter. Growth in gross disposable income, driven by higher employee compensation and interest received, supported this rise.
Ms Keenan noted that despite higher savings, households faced increased interest payments on dwellings, which rose by 3.4%.
Terms of Trade Decline
Australia’s terms of trade fell for the third consecutive quarter, dropping by 2.5%. Export prices decreased by 2.6%, reflecting weaker global demand for bulk commodities. Import prices also fell, led by lower costs for fuels and lubricants.
Nominal GDP grew by 0.4%, with domestic price growth at its lowest level since March 2021. “The growth this quarter reflected softening goods prices alongside resilient services prices,” Ms Keenan said.
Economists Call for Policy Adjustments
The subdued growth has prompted calls for changes in monetary policy. Marcel Theiliant from Capital Economics argued for looser monetary policy, anticipating a rate-cutting cycle next year.
Sean Langcake of Oxford Economics Australia stated, “We expect GDP growth will slowly pick up in the coming quarters.” He added that favourable fundamentals would drive moderate improvements in household consumption.
Sluggish Growth Raises Concerns
Economists remain cautious about Australia’s economic trajectory. With tensions between the federal government and the Reserve Bank over inflation, the economic outlook remains uncertain.
As growth slows, questions linger over how long Australia can sustain its current momentum without significant policy adjustments. The focus will now turn to future quarters to see if recovery efforts gain traction.
