The economy grew 0.9 per cent in the June quarter but Treasurer Jim Chalmers says the encouraging headline figure “doesn’t tell the whole story”.
“Our economy is growing relatively solidly, but some of the challenges in the economy are growing solidly as well,” Dr Chalmers told parliament.
He said the national accounts data, released by the Australian Bureau of Statistics on Wednesday, did not reflect the escalating challenges facing the economy since the data was collected.
“In the two months since the end of the June quarter, we’ve seen a deteriorating global growth outlook, continuing labour shortages, and rising interest rates,” Dr Chalmers said.
Elevated household spending and exports drove economic growth for the third consecutive quarter, according to ABS head of national accounts Sean Crick.
The rush to travel post-pandemic drove the 2.2 per cent lift in household spending for the quarter, contributing 1.1 percentage points to gross domestic product.
Strong exports and slowing imports also made a one percentage point contribution to real GDP growth.
“Mining and agriculture picked up as severe weather conditions passed, and energy exporters responded to the strong global demand for energy in the wake of disruptions to Russian gas supplies to Europe,” Dr Chalmers said.
However, the treasurer expects elevated commodity prices to taper off.
Construction activity dropped off, with home building falling 2.9 per cent during the June quarter.
The national accounts figures also revealed wages growth trailing inflation, and showed household saving rates falling.
KPMG economist Sarah Hunter said the lift in household spending outstripped higher incomes, leading to the fall in overall savings.
“While this is still slightly above pre-COVID levels, there is now limited room for growth in household spending to outstrip household income,” she said.
“This shift, plus the drag from rising prices and mortgage rates, will put a significant dampener on momentum in consumer spending over the next six to 12 months.”
The bureau’s national accounts figures follow the fifth consecutive official cash rate hike in a row on Tuesday.
BIS Oxford Economics head of macroeconomic forecasting Sean Langcake said households would start responding to rising interest rates soon.
“Conditions have become more challenging for households since the June quarter, with the RBA having increased interest rates by 225 basis points since May,” he said.
“This will contribute to a slowing in growth from here.”
He said slowing momentum in the global economy would weigh on Australia’s growth in coming quarters.
Despite the financial pain felt by households, the treasurer said the government would be limited in its ability to hand them relief in the October budget.
“We will provide cost of living relief but we need to do it in the most responsible way that we can and in a way that delivers a broader economic dividend and doesn’t make it harder for the Reserve Bank,” he told reporters on Wednesday.
Shadow treasurer Angus Taylor said the government needed to keep spending restrained in the October budget.
“Monetary and fiscal policy need to work together but Labor is only promising additional budget spending,” Mr Taylor said.
He said the Reserve Bank would have no choice but to lift rates even higher if the government failed to come up with a plan to navigate economic issues.
The Australian Council of Trade Unions said workers’ share of GDP was declining.
“Workers have the lowest share of GDP on record because productivity growth continues to outpace workers’ wages while businesses are raking in billion-dollar profits,” ACTU secretary Sally McManus said.
The union body said legislating multi-employer bargaining would allow wages to lift and workers to secure a larger slice of the pie.
The Reserve Bank’s July credit card data showed the value of credit card transactions falling by 6.3 per cent compared to June.
RateCity research director Sally Tindall said it was good to see people “giving their credit cards a breather”.
“While it’s great to see credit card debt drop, at just over $17 billion the bill is still way too high,” she said.
(Australian Associated Press)