Australian Economy Growth Falls Short of Expectations

Forex - Australia's commodity-rich economy grew less than expected in the third quarter, raising concerns that it could face a risk of recession in the coming quarters as interest rates are likely to remain high for some time. The Australian Bureau of Statistics (ABS) reported that the economy grew by 0.3% compared to the previous quarter and by 0.8% year-on-year. Analysts had expected the economy to grow by 0.5% for the quarter and by 1.1% compared to the previous year.

While the economy has grown for twelve consecutive quarters, the pace of expansion has been steadily slowing since September 2023. The weaker-than-expected results indicate that, despite strong growth in government spending, the economy is struggling to gain momentum.

Reserve Bank of Australia Governor Michele Bullock rejected short-term interest rate cuts, stating that the labor market remains tight while core inflation remains high. Finance Minister Jim Chalmers noted, "The growth in the Australian economy is positive but continues to remain weak. Our economy is growing, but very slowly; it is under pressure due to interest rates, cost of living pressures, and global uncertainties."

The ABS indicated that record-level government investments provided the largest contribution to growth this quarter, while per capita GDP fell for the seventh consecutive quarter. The data showed that overall government investments increased by 6.0% during the quarter, influenced by defense equipment imports as well as hospital and road investments. Meanwhile, investments by state and local public enterprises rose by 8.8% due to investments in roads and renewable energy.

Consumers faced pressure as household spending remained flat in the third quarter following a 0.3% decline in the previous quarter. The household savings rate rose to 3.2% in the third quarter, while gross disposable income increased by 1.5%, outpacing the 0.6% rise in nominal household spending.