Aussie economy grows 0.2% in June quarter

Australian gross domestic product (GDP) rose just 0.2% in the June quarter 2024 and by 1.5% in the 2023-24 financial year, according to the Australian Bureau of Statistics (ABS).

ABS head of national accounts Katherine Keenan said: "The Australian economy grew for the eleventh consecutive quarter, although growth slowed over the 2023-24 financial year."

"Excluding the COVID-19 pandemic period, annual financial year economic growth was the lowest since 1991-92 - the year that included the gradual recovery from the 1991 recession."

GDP per capita was down for the sixth consecutive quarter, falling 0.4%.

State Street Global Advisors APAC economist Krishna Bhimavarapu labelled the data "meagre".

"This is perhaps the clearest indication yet that policy is restrictive enough in Australia. This data should at the very least lead the RBA to make a dovish pivot, considering how uncertain they were during the last meeting," Bhimavarapu said.

"We still look for the first rate cut in November as headline CPI could ease to around 3% in Q3."

Deloitte Access Economics partner Stephen Smith said the soft growth was evidence the economy is "still on life support".

"While the pace of economic growth in the June quarter met the very low bar of market expectations, that headline growth rate hides a fracturing of public and private sector activity," Smith said.

"Today's figures will come as no surprise to many Australians who are already battling through recession-like conditions. Household consumption has fallen in the past three months despite still strong population growth, real retail spending has gone backwards for almost two years now, job creation in white-collar private sector industries has essentially stalled, and business insolvencies have recently hit record highs."

Household spending fell 0.2% detracting 0.1 percentage points from GDP growth.

Meanwhile, total investment fell 0.1% in the June quarter.  In the private sector, new machinery and equipment fell 1.6%, driven by reduced agriculture and retail investment.

This was partly offset by ownership transfer costs, which rose 3.9% with strong activity in the property market.

Despite three quarters of falls, annual growth in total investment was 4.1%.

"Australia's private sector has effectively ground to a halt, with only government spending keeping economic growth in positive territory," Smooth said.

"This is not a sustainable position and shows that higher interest rates have done their job in slowing the economy. The Australian economy was fully 1% smaller than it would have been in the June quarter had it been growing in line with the pre-pandemic trend."

Despite the weaker than expected figures, Smith said there are still some green shoots in the economy.

"The economy has likely reached the bottom of the trough, while interest rates have now clearly peaked. Central banks around the world are cutting rates or are looking to do so," he said.

"Remaining vigilant about inflation is an important priority. But today's figures show that the economic discussion in Australia needs to shift toward encouraging business investment, productivity and growth."