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Live updates: Australia’s GDP numbers show minimal growth, RBA governor Michele Bullock faces Senate, Medibank risks record fine for cyberattack
As always, a very interesting and timely look at the latest GDP figures from In fact, Asia-Pacific economist Callam Pickering.
“Population growth is the only thing standing between Australia and recession,” he writes.
Pickering notes that GDP per capita fell 1.3% last yearwhich is the weakest result of this measure in 33 years – since the recession of the early 1990s.
Not that, he says, the Reserve Bank is particularly worried about this number.
“A per capita recession, although terrible for families, is not very relevant for monetary policy”, observes the former RBA economist.
“Inflation is mainly determined by aggregate demand and not by individual demand.
“At the moment, the weakness of households has been more than compensated by the formation of new households, through immigration.“
He also notes that the biggest boost to GDP growth wasn’t really positive either.
“The biggest contribution to growth in the March quarter came from stocks, which is never a sign of economic health,” he explains.
“When inventories increase significantly, it often reflects challenging products moving.”
And although families spent more money, much of this was a) simply because there were more people, and, b) on essential goods.
“Household spending growth has been revised upwards, but overall it is still very weak,” notes Pickering.
“0.4% increase in the March quarter and just 1.3% compared to last year. Faced with cost-of-living pressures, families prioritized essential goods such as electricity, income and food over discretionary goods.
“Families are, in other words, having less fun with their money.”
The good news for families is that employee pay rose 1% in the March quarteralthough this was the smallest increase in two and a half years as job growth slowed.
Household disposable income grew 1.1% in the quarter and 5.2% last yearalthough inflation has affected the real size of this increase.
“Right now, the domestic sector remains a considerable risk to Australia’s economic prospects,” warns Pickering.
“Even a small deterioration in labor market conditions, a reduction in population growth or even a reluctance to tap into savings could quickly pull the rug out from under household spending, leaving the broader economy in a precarious position.”