Australian economy struggles along to start the year, soft new data reveals

Australia’s economy could only manage slight growth in the first quarter of the year as households squirrelled away more of their income in savings and extreme weather hit exports and tourism.

New data from the ABS released this morning showed GDP rose 0.2 per cent in the March quarter, down from 0.6 per cent in December, and was up 1.3 per cent over the last 12 months.

That’s in line with forecasts, which had been recently pared back – analysts had been expecting a rise of between 0.1 and 0.3 per cent for the quarter, and around 1.2-1.4 per cent for the year.

However, after its first rise in seven quarters in December, per capita GDP went backwards once again, falling 0.2 per cent for the quarter and 0.4 per cent for the year.

Cyclone Alfred and other severe weather took their toll on the economy, while spending growth slowed from 0.7 per cent to 0.4 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.”

At the same time, wage rises helped give Australians more disposable income, but much of that was saved away rather than spent.

“The 1.3 percentage point rise in the household savings ratio this quarter included higher income support from government and insurance claims linked to severe weather events in Queensland,” Keenan said.

“There was also a small rise in small business income, while mortgage interest payments dropped following the Reserve Bank of Australia cash rate cut in February.”

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