Key Points:
- Australian Economy Growth: Australia’s GDP grew 0.1% quarterly and 1.1% annually, below forecasts.
- Inflation: Consumer price inflation at 3.6%, domestic demand inflation at 4.6%.
- Interest Rates: RBA’s cash rate is 4.35%, with mixed market expectations for future changes.
- Migration Impact: Population growth at 2.5% annually affects the housing market and per capita GDP.
Australia’s economic growth demonstrated notable resilience amidst global uncertainties in the March quarter. The nation’s Gross Domestic Product (GDP) exhibited a modest quarterly growth rate of 0.1%, falling short of the forecasted 0.2%. Over the past year, the GDP’s annual growth recorded a rate of 1.1%, reflecting a decline from the previous annual growth of 1.5%. Nominal GDP, however, indicated a stronger performance, growing at 3.5% annually, reaching AUD 2.6 trillion (USD 1.73 trillion). On a per capita basis, nominal GDP stood at AUD 98,224.
April Inflation at 3.6%, Domestic Demand Inflation at 4.6%
Inflation remains a critical challenge for the Australian economy. In April, the report indicated that consumer price inflation reached 3.6%, while domestic demand inflation was higher at 4.6% over the year. The Reserve Bank of Australia (RBA) monitors these figures closely, recognising the need for restrictive policies to manage inflation. The RBA Governor, Michele Bullock, stated, “The economy was ‘very, very weak’, but policy needed to be restrictive to bring demand back into line with supply and curb inflation.”
Household Spending Up 1.3%, Savings Fall to 0.9%
Household spending grew 1.3%, with expenditure on essential items such as electricity and healthcare showing significant contributions. Discretionary spending, however, remained flat, indicating cautious consumer behaviour in non-essential areas. The savings rate in Australia is currently at a historically low level of 0.9%, with past numbers being revised downwards. This low savings rate signals potential vulnerabilities in household financial stability.
Australian Economy: RBA Cash Rate at 4.35%
The RBA’s cash rate is set at 4.35%. Market expectations reflect a nuanced view of future monetary policy moves, with the risk of further rate hikes largely priced out. There is a 50-50 chance of a rate cut by December, with markets fully pricing in a reduction to 4.10% by May next year. These expectations highlight the balancing act the RBA faces in supporting economic growth while controlling inflation.
Migration Increases Population by 2.5%, Drives Rent Up.
Australia’s population growth, driven by migration, stood at 2.5% annually, significantly higher than the average of 1.25% over the past three decades. This booming migration has contributed to a strain on the housing market, leading to high rents. The government has promised to impose caps on future immigration to mitigate these pressures. The rapid increase in Population also had a notable impact on per capita GDP, which saw a quarterly decrease of 0.4% and an annual decline of 1.3%.
