SYDNEY: Australia’s economy stayed stuck in the slow lane in the June quarter as punishing borrowing costs and stubborn inflation squeezed consumers, leaving government spending as the main driver of growth.
Data from the Australian Bureau of Statistics on Wednesday showed real gross domestic product (GDP) rose 0.2% in the second quarter, unchanged for three straight quarters. It was just under market forecasts of 0.3%.
Annual growth slowed to 1.0% from 1.2% the previous quarter, lows last seen during the depths of the pandemic. For the quarter, household spending, which accounts for half of GDP, actually fell 0.2% to drag on growth, as people cut back on trips abroad. The savings rate stayed subdued at 0.6%.
The downturn has been largely engineered by the Reserve Bank of Australia (RBA) which hiked interest rates to a 12-year high of 4.35% in an effort to curb demand and price pressures.
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Measures of prices in the GDP report were also on the high side, with inflation in domestic demand running at 4.2% for the year.
All this inflation has been a boon for nominal GDP, which expanded 4.4% in the year to June.
Stripping out the effects of inflation, however, per capita GDP fell 0.4% in the quarter, the sixth straight quarter of declines. Productivity - the measure of output per hour worked - dropped 0.8% in the quarter.
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