National Accounts weakest since the GFC: Warning on housing as GDP growth slips
Peter Martin | Eryk Bagshaw
The OECD has named house prices as the biggest domestic threat to economic growth as new figures push annual growth to its lowest point since the global financial crisis.
The Australian economy grew just 1.7 per cent in the 12 months to March, down from 3 per cent three years earlier. The result is the worst since the 1.2 per cent recorded during the depths of the financial crisis in September 2009.
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Gross domestic product grew 0.3 during the March quarter after growing 0.7 per cent, falling 0.4 per cent and growing 1.1 per cent in the four quarters before that.
“It has been very lumpy,” said Treasurer Scott Morrison. “It’s what I would describe as modest growth.”
Treasurer Scott Morrison also called for peace, saying the national interest was at stake. Photo: Andrew Meares
Bad weather in NSW and Cyclone Debbie in Queensland disrupted construction and coal exports, but Commonwealth Bank economist Kristina Clifton said the weakness in the figures extended beyond the weather.
While nominal income grew 7.7 per cent throughout the year in response to higher export prices, the split was uneven. Profits grew 22 per cent and wages only 1.5 per cent.
“This is an incredibly weak outcome and it is having a direct negative impact on discretionary household consumption. The feedback loop poses a risk to the Australian economy,” Ms Clifton said.
The wages share of total income slipped to 51.5 per cent, the lowest level since 2009. The profits share rebounded to 27.5 per cent, the highest since 2012.
Shadow treasurer Chris Bowen said none of the all three of the budgets big promises had gone missing – higher economic growth, higher wage growth and lower unemployment. Photo: Andrew Meares
Mr Morrison said much of the jump was due to a bounceback in mining profits, and that modest to low wages growth remained Australia’s most important economic challenge.
Consumer spending grew by a weak but better-than-expected 0.5 per cent in the quarter propped up by a rundown in the household savings ratio to 4.7 per cent, its lowest level since 2008.
“There remains uncertainty about whether this will continue going forward,” said National Australia Bank economist Riki Polygenis. “It’s against a backdrop of elevated unemployment and under-employment and high household debt.”
Real GDP growth is now at its lowest level since the Global Financial Crisis
In its bi-annual global economic outlook, The Organisation for Economic Co-operation and Development warned of further widespread job losses from what it said was Australia’s biggest domestic risk: a large fall in house prices.
“This could reduce household wealth and consumption, and damage the construction sector, leading to significant job losses,” the report said.
The OECD expects the Reserve Bank to begin lifting interest rates by the end of the year, in part to ease “the build up of financial distortions that can accompany a sustained low-interest rate environment”.
Like the Treasury and the Reserve Bank, the OECD expects economic growth to climb to around 3 per cent next year. Globally it sees a lift in growth to 3.6 per cent after years of weakness.
Victorian Treasurer Tim Pallas hailed the economic growth figures as showing Victoria “shining like a bright diamond”.
Victorian state final demand, a measure of spending, climbed 4.5 per cent over the year to March, more than double the national average and the NSW result of 1.9 per cent. Demand in Queensland and NSW grew not at all in the March quarter, due in part to the impact of Cyclone Debbie and floods. West Australian demand slid 6.6 per cent over the year and 0.2 per cent over the quarter.
State by state
Annual growth in state final demand, per cent
In a sign that the decline in mining investment may be nearing an end, business investment climbed during both the December and March quarters in the first back-to-back improvment since 2012.
Shadow treasurer Chris Bowen said all three of the budget’s big promises had gone missing – higher economic growth, higher wage growth and lower unemployment.
“The Australian economy is currently experiencing the lowest annual GDP growth since the Global Financial Crisis,” he said.
“It is telling that during the global financial crisis the Australian economy was swimming against the tide with relatively strong growth performances and yet now with the global economy performing better, Australia’s growth rate is slowing and is well below trend.”
Mr Morrison said challenges remained, but so did opportunities.
“This is the March quarter we are talking about, not next March or next June. We must continue to focus on policies that will increase investment, wages and jobs.”
Australian quarterly GDP growth,1990 – 2017