Small uptick in growth welcome

On the eve of the federal election campaign, Jim Chalmers was upbeat about the national accounts figures released by the Australian Bureau of Statistics on Wednesday. After a paltry 0.3 per cent rise in GDP in the September quarter, growth in the last three months of 2024 doubled to 0.6 per cent. Year on year, the economy grew by 1.3 per cent across 2024. “These numbers show that the Australian economy has turned a corner, and it looks more and more like the soft landing that we’ve been planning for and preparing for,” the Treasurer enthused.

After successive quarters of anaemic growth, the uptick was welcome. But, to put it in perspective, the growth recorded was in line with the average rate in the decade preceding the Covid pandemic and still one of the weakest results, outside the pandemic, since the early 1990s recession, Jack Quail reports. The economic reform policies of both major parties have a long way to go to advance productivity and living standards.

After seven straight quarters of falling GDP per capita, that measure edged up to 0.1 per cent in the December quarter – the first increase since 2022. It’s a modest start but, without a substantial improvement, maintaining and improving living standards will be increasingly problematic.

The figures contain plenty of pointers to guide the major parties’ platforms. Real unit labour costs, for example, increased by 2.3 per cent during 2024. While slightly below inflation, the rise was not matched by productivity gains – a major determinant of living standards, as former Reserve Bank governor Philip Lowe pointed out earlier in the week. GDP per hour worked went backwards by 1.2 per cent across the year, a trend that points to the need for future wage increases to be tied to productivity improvements under a more flexible and effective workplace relations system. GDP per hour worked fell by 0.1 per cent in the December quarter after declines of 0.7 per cent and 0.5 per cent in the previous two quarters.

As Judith Sloan writes, the level of labour productivity is where it was in 2016, a dismal and historically unprecedented outcome that is costing households: “Had we been able to achieve trend productivity growth over the past nearly 10 years, real incomes would be 9 per cent higher.” For the sake of Australians’ quality of life now and for a generation, Labor and the Coalition must both address the challenge. RBA governor Michele Bullock told the House of Representatives economics committee in February that productivity growth was the only path to sustainable increases in living standards. The Coalition’s policy to task the Productivity Commission with an annual stocktake of regulation as part of a productivity plan is a step in the right direction. But it will need to produce results.

While Australian Chamber of Commerce and Industry chief executive Andrew McKellar said the modest growth figures in the national accounts gave “some heart to businesses looking for signs of life in the economy”, investment in plant and equipment remained flat, indicating businesses remained wary of future conditions. Outside mining and renewables projects, private investment is barely growing, Tom Dusevic writes, while output is shrinking in heavy-duty industries, including construction, manufacturing and mining. Public sector spending and investment, in contrast, remain high, especially by states and territories. But taxpayer-funded government spending is not a sustainable strategy towards revenue growth and prosperity. In coming quarters the impact of Donald Trump’s tariffs on our trading economy also remains to be seen.