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The Advertiser
7 days ago
- Business
- The Advertiser
Fall in public spending drives weak economic growth
A shaky public spending handover has stalled Australia's post-COVID-19 recovery, with economic growth slowing to 0.2 per cent in the first three months of the year. Economists had expected gross domestic product to expand 0.4 per cent, following a 0.6 per cent rise in the December quarter, but weaker-than-expected household consumption, business investment and public spending curtailed the economy's progress. Annual economic growth held steady at 1.3 per cent, the Australian Bureau of Statistics reported on Wednesday. It means the economy would need to grow by 0.7 per cent in the June quarter to meet the Reserve Bank's forecast of 1.8 per cent annual growth by the middle of this year. An outcome below that would increase the chance of further interest rate cuts. Economic growth was impacted negatively by inclement weather during the quarter, with mining, tourism and shipping particularly impacted, Australian Bureau of Statistics head of national accounts Katherine Keenan said. "'Economic growth was soft in the March quarter," she said. "Public spending recorded the largest detraction from growth since the September quarter 2017." Treasury estimates recently revealed Cyclone Alfred and flooding in Queensland and northern NSW cut $2.2 billion from the national economy. GDP per capita fell 0.2 per cent in the quarter, following a 0.1 per cent rise in the December 2024 quarter that ended a 21-month long per capita recession. Treasurer Jim Chalmers said any growth was a decent outcome, given all the uncertainty around the world. "Even with these challenges, we are seeing private demand and incomes continuing to recover," he said. "Today's numbers show the private sector stepping up as public demand steps back." But Westpac senior economist Pat Bustamante said Australia was suffering from a "shaky handover" from public to private. "Over the last two years, we have seen public demand, or public spending, grow strongly and drive economic activity. That can't continue forever," he told ABC News. "As that slows down, there was always going to be a risk that the private sector couldn't pick up the slack, leading to a bit of a subdued quarter of growth in the economy." Public spending fell two per cent while growth in household spending slowed from 0.7 to 0.4 per cent. "Growth was relatively slow across most household spending categories following stronger than usual spending during the December quarter's retail sales events," Ms Keenan said. Government supports such as energy rebates will continue to be rolled off during the year. Declining interest rates and increased disposable income from real wages growth should boost household spending, but economic uncertainty from Donald Trump's tariffs remains a headwind. While the figures won't show the worst effects of global uncertainty on consumer demand, given the US president's main tariff announcement wasn't until April 2, trade barriers will continue to weigh on economic growth. The Organisation for Economic Cooperation and Development has downgraded its forecast for Australia's GDP growth from 1.9 per cent to 1.8 per cent in 2025. But the outlook is rosier in 2026, with economic growth expected to accelerate to 2.2 per cent as interest rates continue to fall and disposable incomes recover. Rates markets implied about an 80 per cent chance for the RBA to cut interest rates by 25 basis points at its next meeting in July, with two more cuts expected by Christmas. A shaky public spending handover has stalled Australia's post-COVID-19 recovery, with economic growth slowing to 0.2 per cent in the first three months of the year. Economists had expected gross domestic product to expand 0.4 per cent, following a 0.6 per cent rise in the December quarter, but weaker-than-expected household consumption, business investment and public spending curtailed the economy's progress. Annual economic growth held steady at 1.3 per cent, the Australian Bureau of Statistics reported on Wednesday. It means the economy would need to grow by 0.7 per cent in the June quarter to meet the Reserve Bank's forecast of 1.8 per cent annual growth by the middle of this year. An outcome below that would increase the chance of further interest rate cuts. Economic growth was impacted negatively by inclement weather during the quarter, with mining, tourism and shipping particularly impacted, Australian Bureau of Statistics head of national accounts Katherine Keenan said. "'Economic growth was soft in the March quarter," she said. "Public spending recorded the largest detraction from growth since the September quarter 2017." Treasury estimates recently revealed Cyclone Alfred and flooding in Queensland and northern NSW cut $2.2 billion from the national economy. GDP per capita fell 0.2 per cent in the quarter, following a 0.1 per cent rise in the December 2024 quarter that ended a 21-month long per capita recession. Treasurer Jim Chalmers said any growth was a decent outcome, given all the uncertainty around the world. "Even with these challenges, we are seeing private demand and incomes continuing to recover," he said. "Today's numbers show the private sector stepping up as public demand steps back." But Westpac senior economist Pat Bustamante said Australia was suffering from a "shaky handover" from public to private. "Over the last two years, we have seen public demand, or public spending, grow strongly and drive economic activity. That can't continue forever," he told ABC News. "As that slows down, there was always going to be a risk that the private sector couldn't pick up the slack, leading to a bit of a subdued quarter of growth in the economy." Public spending fell two per cent while growth in household spending slowed from 0.7 to 0.4 per cent. "Growth was relatively slow across most household spending categories following stronger than usual spending during the December quarter's retail sales events," Ms Keenan said. Government supports such as energy rebates will continue to be rolled off during the year. Declining interest rates and increased disposable income from real wages growth should boost household spending, but economic uncertainty from Donald Trump's tariffs remains a headwind. While the figures won't show the worst effects of global uncertainty on consumer demand, given the US president's main tariff announcement wasn't until April 2, trade barriers will continue to weigh on economic growth. The Organisation for Economic Cooperation and Development has downgraded its forecast for Australia's GDP growth from 1.9 per cent to 1.8 per cent in 2025. But the outlook is rosier in 2026, with economic growth expected to accelerate to 2.2 per cent as interest rates continue to fall and disposable incomes recover. Rates markets implied about an 80 per cent chance for the RBA to cut interest rates by 25 basis points at its next meeting in July, with two more cuts expected by Christmas. A shaky public spending handover has stalled Australia's post-COVID-19 recovery, with economic growth slowing to 0.2 per cent in the first three months of the year. Economists had expected gross domestic product to expand 0.4 per cent, following a 0.6 per cent rise in the December quarter, but weaker-than-expected household consumption, business investment and public spending curtailed the economy's progress. Annual economic growth held steady at 1.3 per cent, the Australian Bureau of Statistics reported on Wednesday. It means the economy would need to grow by 0.7 per cent in the June quarter to meet the Reserve Bank's forecast of 1.8 per cent annual growth by the middle of this year. An outcome below that would increase the chance of further interest rate cuts. Economic growth was impacted negatively by inclement weather during the quarter, with mining, tourism and shipping particularly impacted, Australian Bureau of Statistics head of national accounts Katherine Keenan said. "'Economic growth was soft in the March quarter," she said. "Public spending recorded the largest detraction from growth since the September quarter 2017." Treasury estimates recently revealed Cyclone Alfred and flooding in Queensland and northern NSW cut $2.2 billion from the national economy. GDP per capita fell 0.2 per cent in the quarter, following a 0.1 per cent rise in the December 2024 quarter that ended a 21-month long per capita recession. Treasurer Jim Chalmers said any growth was a decent outcome, given all the uncertainty around the world. "Even with these challenges, we are seeing private demand and incomes continuing to recover," he said. "Today's numbers show the private sector stepping up as public demand steps back." But Westpac senior economist Pat Bustamante said Australia was suffering from a "shaky handover" from public to private. "Over the last two years, we have seen public demand, or public spending, grow strongly and drive economic activity. That can't continue forever," he told ABC News. "As that slows down, there was always going to be a risk that the private sector couldn't pick up the slack, leading to a bit of a subdued quarter of growth in the economy." Public spending fell two per cent while growth in household spending slowed from 0.7 to 0.4 per cent. "Growth was relatively slow across most household spending categories following stronger than usual spending during the December quarter's retail sales events," Ms Keenan said. Government supports such as energy rebates will continue to be rolled off during the year. Declining interest rates and increased disposable income from real wages growth should boost household spending, but economic uncertainty from Donald Trump's tariffs remains a headwind. While the figures won't show the worst effects of global uncertainty on consumer demand, given the US president's main tariff announcement wasn't until April 2, trade barriers will continue to weigh on economic growth. The Organisation for Economic Cooperation and Development has downgraded its forecast for Australia's GDP growth from 1.9 per cent to 1.8 per cent in 2025. But the outlook is rosier in 2026, with economic growth expected to accelerate to 2.2 per cent as interest rates continue to fall and disposable incomes recover. Rates markets implied about an 80 per cent chance for the RBA to cut interest rates by 25 basis points at its next meeting in July, with two more cuts expected by Christmas. A shaky public spending handover has stalled Australia's post-COVID-19 recovery, with economic growth slowing to 0.2 per cent in the first three months of the year. Economists had expected gross domestic product to expand 0.4 per cent, following a 0.6 per cent rise in the December quarter, but weaker-than-expected household consumption, business investment and public spending curtailed the economy's progress. Annual economic growth held steady at 1.3 per cent, the Australian Bureau of Statistics reported on Wednesday. It means the economy would need to grow by 0.7 per cent in the June quarter to meet the Reserve Bank's forecast of 1.8 per cent annual growth by the middle of this year. An outcome below that would increase the chance of further interest rate cuts. Economic growth was impacted negatively by inclement weather during the quarter, with mining, tourism and shipping particularly impacted, Australian Bureau of Statistics head of national accounts Katherine Keenan said. "'Economic growth was soft in the March quarter," she said. "Public spending recorded the largest detraction from growth since the September quarter 2017." Treasury estimates recently revealed Cyclone Alfred and flooding in Queensland and northern NSW cut $2.2 billion from the national economy. GDP per capita fell 0.2 per cent in the quarter, following a 0.1 per cent rise in the December 2024 quarter that ended a 21-month long per capita recession. Treasurer Jim Chalmers said any growth was a decent outcome, given all the uncertainty around the world. "Even with these challenges, we are seeing private demand and incomes continuing to recover," he said. "Today's numbers show the private sector stepping up as public demand steps back." But Westpac senior economist Pat Bustamante said Australia was suffering from a "shaky handover" from public to private. "Over the last two years, we have seen public demand, or public spending, grow strongly and drive economic activity. That can't continue forever," he told ABC News. "As that slows down, there was always going to be a risk that the private sector couldn't pick up the slack, leading to a bit of a subdued quarter of growth in the economy." Public spending fell two per cent while growth in household spending slowed from 0.7 to 0.4 per cent. "Growth was relatively slow across most household spending categories following stronger than usual spending during the December quarter's retail sales events," Ms Keenan said. Government supports such as energy rebates will continue to be rolled off during the year. Declining interest rates and increased disposable income from real wages growth should boost household spending, but economic uncertainty from Donald Trump's tariffs remains a headwind. While the figures won't show the worst effects of global uncertainty on consumer demand, given the US president's main tariff announcement wasn't until April 2, trade barriers will continue to weigh on economic growth. The Organisation for Economic Cooperation and Development has downgraded its forecast for Australia's GDP growth from 1.9 per cent to 1.8 per cent in 2025. But the outlook is rosier in 2026, with economic growth expected to accelerate to 2.2 per cent as interest rates continue to fall and disposable incomes recover. Rates markets implied about an 80 per cent chance for the RBA to cut interest rates by 25 basis points at its next meeting in July, with two more cuts expected by Christmas.
Straits Times
7 days ago
- Business
- Straits Times
Australia's economy barely grows in first quarter as spending drops
SYDNEY - Australia's economy barely grew in the first quarter as consumers stayed stubbornly frugal and government spending, the engine of activity in 2024, sputtered to a standstill, underlining the need for more policy stimulus. Real gross domestic product (GDP) rose 0.2 per cent quarter on quarter in the three months to March, Australian Bureau of Statistics (ABS) data showed on June 4, missing market forecasts of 0.4 per cent. Year-on-year growth flatlined at 1.3 per cent, when analysts had looked for a pick-up to 1.5 per cent, and remained well short of the 2.5 per cent pace that used to be considered 'normal'. The Reserve Bank of Australia has already cut interest rates twice since February to 3.85 per cent and the minutes of the May policy meeting showed that it was open to an outsized half-point move as US tariffs darkened the outlook for the global economy. 'While it's still too soon to know for sure, early signs point to an even larger drag from confidence on consumption and investment in Q2,' said Ben Udy, lead economist for Oxford Economics Australia. 'The RBA will be watching closely for further signs that the weakness in activity in Q1 extends into Q2 – if that evidence continues to rack up, the RBA may opt to cut rates again in July.' Swaps imply an 80 per cent probability of a rate cut in July, with a total easing of almost 100 bps priced in to a bottom of 2.85 per cent by early next year. 'Extreme weather events reduced domestic final demand and exports. Weather impacts were particularly evident in mining, tourism and shipping,' said Katherine Keenan, ABS head of national accounts. The report showed the household savings ratio jumped to 5.2 per cent, the highest since third quarter 2022, as consumers chose to save rather than spend. That is partly why household consumption edged up a tepid 0.4 per cent in the quarter, adding just 0.2 percentage points to GDP growth despite lower borrowing costs and cooling inflation. In particular, government spending, which has single-handedly lifted economic growth over the past year, has disappointed to make the largest drag on growth since 2017. Measures of inflation in the report showed a continued moderation with the deflator for domestic demand slowing to an annual 3.3 per cent from 3.5 per cent in the fourth quarter. REUTERS Join ST's Telegram channel and get the latest breaking news delivered to you.
The Age
7 days ago
- Business
- The Age
Economy slows as government spending eases
Australia's economic growth has slowed to 0.2 per cent in the first three months of the year. Data from the Australian Bureau of Statistics released on Wednesday showed the country's GDP grew at the slowest pace since the three months to June last year – and below economists' expectations for 0.3 per cent growth. It comes after the economy picked up a bit of pace in the December quarter. Extreme weather events dampened demand and weighed down exports, although household spending, which accounts for more than half of the country's economic growth, continued to grow at 0.4 per cent. This was driven by an uptick in spending on essentials, including utilities during the warmer-than-average summer and food as Queensland households stockpiled in preparation for cyclone Alfred. Data on Tuesday revealed government spending and net trade, other key components of GDP, also slipped, detracting from economic growth. Household spending on discretionary items was also relatively slow following a stronger-than-usual retail sale period over Christmas. The bureau's head of national accounts, Katherine Keenan, said the figures showed government spending, which has propped up the economy over the past two years, slowed sharply through the first three months of the year.
Sydney Morning Herald
7 days ago
- Business
- Sydney Morning Herald
Economy slows as government spending eases
Australia's economic growth has slowed to 0.2 per cent in the first three months of the year. Data from the Australian Bureau of Statistics released on Wednesday showed the country's GDP grew at the slowest pace since the three months to June last year – and below economists' expectations for 0.3 per cent growth. It comes after the economy picked up a bit of pace in the December quarter. Extreme weather events dampened demand and weighed down exports, although household spending, which accounts for more than half of the country's economic growth, continued to grow at 0.4 per cent. This was driven by an uptick in spending on essentials, including utilities during the warmer-than-average summer and food as Queensland households stockpiled in preparation for cyclone Alfred. Data on Tuesday revealed government spending and net trade, other key components of GDP, also slipped, detracting from economic growth. Household spending on discretionary items was also relatively slow following a stronger-than-usual retail sale period over Christmas. The bureau's head of national accounts, Katherine Keenan, said the figures showed government spending, which has propped up the economy over the past two years, slowed sharply through the first three months of the year.
West Australian
7 days ago
- Business
- West Australian
Australian economy: Slow March quarter growth just 0.2 per cent
Australia's economy grew just 0.2 per cent in the first three months of the year, according to the latest data from the Australian Bureau of Statistics. Through the 12 months to March, growth was 1.3 per cent. 'Economic growth was soft in the March quarter,' ABS head of national accounts Katherine Keenan said. 'Public spending recorded the largest detraction from growth since the September quarter 2017. 'Extreme weather events reduced domestic final demand and exports. Weather impacts were particularly evident in mining, tourism and shipping.' The period covered the Reserve Bank's February rate cut and was prior to US President Donald Trump's 'liberation day' tax hikes on trade. Economists yesterday lowered their hopes for the March quarter figures on the back of a run of weak data. ANZ had expected 0.2 per cent growth while Commonwealth Bank tipped 0.3 per cent. International body the Organisation for Economic Co-operation and Development also revised down their projections thanks to the chaos of Mr Trump's trade war. 'Weakened economic prospects will be felt around the world, with almost no exception,' chief economist Álvaro Pereira said. The OECD warned Australia had been hit hard by a decade-long international slowdown of business investment which will weigh on growth and wages. The Reserve Bank cut interest rates a second time in May, to brace for the trade war and amid encouraging signs that inflation had slowed. Minutes from that meeting showed the RBA's board believed trade uncertainty would 'best be managed by adopting a path of least regret, which . . . would be likely to involve a lower cash rate'. Earlier this week, Treasurer Jim Chalmers had anticipated the economy would be 'resilient in the face of substantial headwinds at home and abroad'. 'Our economy has been hit by natural disasters and we're not immune to global volatility, but the progress Australians have made together means we are well placed and well prepared to face this uncertainty,' he said on Monday. More to come
