Australia had a solid fourth quarter last year, but it wasn’t enough to turn around a forlorn season.
During the calendar year, the nation’s production of goods and services increased by less than 1 per cent over the previous year’s entire output, which, aside from the pandemic, is the slowest pace of growth since the early 1990s recession.
The electorate is in a foul mood and is, at this stage, impervious to the jolly talk from Coach Albo and his motivational expert Dr Jim that after a bright pre-season “we’ve turned the corner” and are now kicking with the wind.
Plainly, we should have performed much better in 2024, given all the help from imported players, chunky pay rises and the sugary, taxpayer-funded drinks at halftime.
Last year our population grew by 2 per cent. While every worker got a tax cut on July 1, personal income tax receipts increased by 4 per cent over 12 months.
Governments have been pumping up their spending to record levels. Employment grew by 445,000, although the care sector and public services account for a mammoth share of the new jobs.
And yet, the scoreboard shows a year of insipid, grinding GDP growth as the Reserve Bank kept the squeeze on borrowers to bring demand back into balance with supply.
Household spending per capita, and after inflation, was weak, especially on discretionary items such as hospitality and entertainment (even though there were blockbuster shows and sporting events spread throughout the year).
Private investment, outside of mining and renewables projects, is barely growing, while output is shrinking in our heavy-duty industries, including construction, manufacturing and mining.
The turmoil of Trump’s tariffs, the likely material effects and the sheer unpredictability of the trading environment is bad news for a free-trading nation like ours.
A week ago, Treasury secretary Steven Kennedy warned “the escalation in trade tensions is creating significant global policy uncertainty”.
“This may dampen business investment, including in Australia, which will pose risks to both growth and employment,” Kennedy told Senate estimates.
Economists believe an ailing economy is in recovery, with last month’s central bank cash rate cut, lower inflation, and wage rises providing a boost to household income and to business investment.
Deloitte Access Economics partner Stephen Smith describes the momentum shift as “the economy kicking into gear rather than firing on all cylinders”.
On the home front, official forecasts suggest that we’ll be growing by around 2.3 per cent in annual “through the year terms” all the way to the end of December 2026 (up from the 1.3 per cent in the recent December quarter on this measure).
Market economists are factoring in another couple of rate cuts this year, which will boost consumer confidence and spending. Still, RBA deputy governor Andrew Hauser on Wednesday pushed back against such expectations of more interest-rate relief for families and businesses.
“The board does not currently share the market’s confidence that a sequence of further cuts will be required,” he said.
Ahead of its next meeting, the RBA board is worried about the strength of the labour market and the economy’s supply capacity.
It’s not clear what exactly will prompt further monetary easing, but it’s plain to see that we need more dynamism in our economic game if we are to crawl out of the infernal second division.
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