Economy growing more slowly than 3.5 percent long term average

The Australian economy grew 0.4 per cent in seasonally adjusted chain volume terms in the March quarter 2019, according to figures released by the Australian Bureau of Statistics (ABS) today. 

Ryan Felsman at CommSec said the economy has lost momentum.

"The annual growth rate is the weakest since September 2009.

"Like other advanced economies, output has slowed since mid-2018 as US-China trade tensions weigh on global growth. But domestic demand has also slowed, as evidenced by low inflation.    

"And soft consumer spending is the main culprit.

"Household incomes are being squeezed due to a combination of modest wages growth and increasing taxes paid due to ‘bracket creep’ (where taxpayers are pushed into higher income tax brackets).

"The negative ‘wealth effect’ from the property downturn is encouraging Aussies to deleverage amid elevated household debt, crimping consumption."

Felsman said the Reserve Bank cut interest rates to fresh record lows of 1.25 per cent yesterday and "appears likely to reduce interest rates to at least 1 per cent."

Chief Economist for the ABS, Bruce Hockman, said the economy continues to grow as we head towards twenty eight years of sustained growth.

Government spending was the main contributor to growth reflecting ongoing delivery of services in disability, health and aged care. 

Household spending slowed and contributed a modest 0.1 per cent to growth reflecting reduced spending on discretionary goods such as furnishing and household equipment, recreation and culture and hotels, cafes and restaurants. 

Dwelling investment continued to detract this quarter. The slowing housing market has resulted in significant falls in ownership transfer costs, particularly stamp duty. 

 “The Australian economy continues to grow but more slowly than our long term average of 3.5 per cent," Hockman said.

Economist Alex Joiner said the Australian economy remains in a per capita GDP recession with the third consecutive quarterly decline in real GDP per capita.

Commentator Callum Pickering noted Australia has to go all the way back to 2009 - the height of the global financial crisis - to see softer growth.