The Australian economy grew by 0.5% in the final three months of 2022, according to the National Accounts figures released by the Bureau of Statistics. However, the growth rate was lower than most economists’ predictions, and while annual growth was in line with analyst expectations at 2.7%, household spending growth slowed down due to rising interest rates and high inflation. The household savings rate has also decreased for the fifth consecutive quarter, from 7.1% to 4.5%, as Australians dipped into their savings to fund their modest increase in spending.
Although spending on food, eating out, accommodation, and domestic travel continued to rise, other categories of retail spending such as recreation and culture, clothing and footwear, and furnishings and household equipment fell. The fall in business investment negated the rise in household consumption, while changes in inventories subtracted half a percentage point from GDP. Meanwhile, a slump in imports was the main factor preventing Australia’s economy from contracting, adding 0.9 percentage points to the growth that only totalled 0.5% in the quarter.
The rise in exports of goods and services by 1.1% was accompanied by a fall in imports of 4.3%, adding 1.1 percentage points to the quarterly GDP figure. This trend was driven by cheaper, short-haul destinations that Australian travellers favoured, leading to a 6.5% decline in imports of services. This outcome does not bode well for Australia’s economic outlook for 2023, according to Indeed’s Asia-Pacific economist Callam Pickering. The 4.3% fall in imports was the largest non-pandemic decline since the global financial crisis, suggesting that high prices are impacting household and business spending patterns.
The weak result in domestic demand during the December quarter led to the economy hitting a soft spot, resulting in the weakest outcome outside of a lockdown period since June 2014. Although the Australian economy grew, economists suggest it was not the type of growth that would boost confidence for the year ahead, and the overall picture shows an economy that is slowing down. However, a significant economic downturn seems increasingly possible, but a near-term spike in the unemployment rate seems unlikely.
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