Australia's economic growth in the three months leading up to June, as well as for the 2022-23 financial year, was hindered by weaker household consumption. Nevertheless, the results surpassed many forecasts made prior to the release of the national accounts.
The Australian Bureau of Statistics reported that GDP increased by 0.4% in the June quarter compared to the first quarter and by 2.1% compared to the same period in the previous year.
Economists had anticipated annual growth of 1.7% to 1.9% for the year ending in June, a slowdown from the 2.3% annual growth rate in the first quarter. However, strong investment from both government and private sectors, particularly in trade, especially services such as travel, exceeded expectations. Nonetheless, household spending only saw a minimal increase of 0.1%, down from 0.2% in the March quarter.
Households, under financial pressure, once again depleted their savings, with the savings ratio estimated in the national accounts dropping to 3.2%, the lowest since the pandemic. It had fallen from 3.6% in the March quarter and 8.1% in the June 2022 quarter.
Katherine Keenan, the head of national accounts at ABS, attributed the decline in the household saving ratio to higher interest payments on dwellings, increased income tax, and rising living costs.
The terms of trade declined by 7.9%, primarily due to lower prices for various commodities, including coal, LNG, and metals like copper and lithium. This was a notable decrease from the 2.8% growth seen in the March quarter. However, nominal GDP grew by 9.7% over the 2022-23 period, contributing to a record surplus of approximately $20 billion in the federal budget for that fiscal year.
The national accounts also reflected the impact of multiple interest rate hikes by the Reserve Bank over the past 18 months to combat inflation, which has now started to slow down.
In light of these economic developments, Treasurer Jim Chalmers commented, "The national accounts show the Australian economy remaining sturdy in the face of unrelenting pressure." He noted that economic growth held up relatively well in the second quarter, despite challenges such as high interest rates, moderating inflation, global uncertainty, and the slowdown in China.
Investment increased by 2.4% in the quarter, driven by growth in areas like transport infrastructure and national defense, as reported by the ABS. Additionally, services exports surged by 12.1% compared to the previous quarter, with travel services leading the way, as international student and tourist numbers in Australia continued to recover from the COVID-19 pandemic.
Imports of services also saw a 4.7% increase, with travel services being a major driver, as more Australians traveled overseas.
Despite these economic ups and downs, Australia experienced a decline in GDP per capita due to slower growth and population increases resulting from migration and students. Economic activity per person fell by 0.3% in the June quarter, following a similar decline in the preceding three months.
Notable changes in household spending included a 2.5% reduction in expenditures on home furnishings and recreation and culture, offset by significant increases in rent payments. Moreover, households spent $82.8 billion on mortgage interest payments during the financial year, while spending on gambling decreased by 7% in the quarter.
However, spending on vehicles increased by 5.8%, supported by the easing of supply constraints and the delivery of previously ordered vehicles, as well as businesses taking advantage of an investment credit expiring on June 30.