Economic growth can’t keep pace with population surge

The nation’s per-capita recession deepened in the June quarter, as tepid growth failed to keep pace with a migration-fuelled jump in the population.

Treasurer Jim Chalmers in Canberra on Wednesday. Picture: NewsWire / Martin Ollman

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The nation’s per-capita recession deepened in the June quarter, as tepid growth failed to keep pace with a migration-fuelled jump in the population.

While overall economic growth was positive, albeit very weak after it expanded by just 0.2 per cent across the June quarter, Australians’ share of economic output reversed for a sixth consecutive quarter.

Indeed, according to the ­Australian Bureau of Statistics, GDP per capita slipped a further 0.4 per cent in the three months to June, to be 1.5 per cent lower through the year.

While GDP measures the total market value of the goods and services produced in a country, GDP per capita divides economic output by a country’s population.

AMP economist Diana Mousina said Australia’s per capita recession had now reached its longest stretch since the national accounts data originated in the 1970s.

“The only other comparable period was in the early-mid ’80s during the recession, when per-capita GDP was negative for two quarters, turned positive and then was negative again for four quarters,” she said.

In the past financial year, ­population growth has been ­running at a brisk annual rate of about 2.5 per cent, mostly attributed to the return of international students.

This more than outpaced the rise in GDP, up just 1 per cent over the same period.

While GDP per capita peaked at $22,881 in the 2022 June quarter coming out of the ­pandemic, Australians have since witnessed their individual share of the economy plunge by more than $450 to $22,415, ABS data shows.

The national accounts also showed that income tax payments as a percentage of taxable income were 23.4 per cent.

Economist Saul Eslake said this was the “highest on record going back to 1959”.

“That compares to 22 per cent in 2022-23,” he said.

Mr Eslake said every financial year before 2021-22 was below 20, apart from 1999-2000 when it reached 22 per cent.

“That is a combination of bracket creep and higher proportion of people working and hence paying income tax,” he said,

Underscoring the challenging conditions buffeting family budgets, the GDP figures registered a decline in household consumption as discretionary spending continued to be wound back in favour of essential purchases.

Falling for the first time since the pandemic in 2021, household consumption was 0.2 per cent lower across the June quarter, bringing annual growth to just 0.5 per cent, well short of the Reserve Bank’s own internal forecasts for a 1.1 per cent increase.

“The RBA may be quietly pleased with the household developments in the June quarter as it seeks a better balance in demand and supply,” RBC capital markets chief economist Su-Lin Ong said.

“We expect this sector, and the labour market, to remain its focus in the coming months and largely determine its policy stance.”

However, with Labor’s overhauled income tax cuts hitting consumers’ bank accounts and a host of measures to ease the cost of living taking effect from July 1, economists expect that household savings and disposable incomes will push higher in coming months.

Despite the increase, Commonwealth Bank’s head of Australian economics Gareth Aird said they were unlikely to shift the needle for household consumption.

“Private surveys suggest that the bulk of households intend to save rather than spend their tax cut,” he said.