Bevan Graham’s Post

Australia’s year-on-year growth rate is at its weakest since the COVID lockdown in 2020, but the RBA is reluctant to cut rates due to sticky inflation in part driven by record public spending. The year-on-year growth rate is well below Australia’s long run trend and the weakest since the COVID lockdown in 2020. Excluding COVID, it is the slowest year-on-year growth rate since the 1991 recession. This very weak growth pulse highlights the need for interest rate cuts, which will be difficult for the RBA to deliver given that inflation remains uncomfortably high thanks to record public sector spending. Also noteworthy was that the economy has recorded its seventh consecutive quarterly contraction in per capita growth terms. This report discusses the outlook for 2025, given ailing productivity and per capita GDP growth, versus the cyclical boost from the impact of tax cuts and “pre-election” government stimulus. Read the full report here - https://lnkd.in/giebY-ci

US market strength is positively influencing local markets, even amid poor domestic economic data. Australia's September quarter GDP released last week showed the slowest year-on-year growth rate (excluding COVID-19 effects) since the 1991 recession. Without booming government spending (+8.3% year-on-year), negative growth would likely be evident. David Cassidy and the Investment Strategy team delve into these dynamics and the outlook for Australia in 2025.

📉 Australia Q3 GDP Growth Falls Short of Expectations 🇦🇺 In the latest economic update, Australia reported a quarterly GDP growth of 0.3% for Q3 2024, a slight increase from the previous quarter's 0.2%, but below market expectations of 0.4%. This marks the 12th consecutive quarter of growth, showcasing resilience; however, the pace raises concerns as we navigate an uncertain economic landscape. Key highlights from the report: Fixed Investment Surge: A standout performer in Q3, fixed investment accelerated, contributing 0.4 percentage points to GDP with an impressive 1.5% growth, the strongest performance in five quarters. This uptick was underpinned by a record-high public investment growth of 6.3%. Stable Government Spending: Government expenditure maintained stability at 1.4%, fueled by ongoing social benefits to households, which have become essential amidst fluctuating economic conditions. Household Spending Challenges: Household consumption was flat, following a 0.3% decline in Q2. The anticipated rebate-driven decline in electricity expenditures was offset by increases in other spending categories, indicating shifting consumer behavior. Trade Balance Impact: Exports rose by 0.2%, while imports declined by 0.3%, positively contributing 0.1 percentage points to GDP. However, inventory reductions subtracted 0.4 percentage points, highlighting ongoing supply chain dynamics. Household Savings Rising: On a promising note, the household savings ratio climbed to 3.2% from 2.4%, reflecting a slight increase in financial cushioning for consumers. Annual Growth Context: Year-over-year, GDP growth stands at 0.8%, the weakest since Q4 2020, pointing to economic headwinds as inflationary pressures and high interest rates continue. As we move forward, understanding these trends will be crucial for policymakers and businesses alike as they strategize for both short-term stability and long-term growth. #Australia #GDP #EconomicGrowth #Investment #ConsumerSpending #forex #audusd #sydney

The ABS's latest national accounts show a concerning trend of six consecutive quarters of real per capita GDP decline in Australia, with a 2.0% drop since the Albanese government took office in June 2022. While this decline is not as steep as past recessions, it marks the longest downturn in modern history. The recent report also reveals a significant decrease in real per capita household disposable income, making Australia stand out globally for all the wrong reasons. Read more: https://heyor.ca/f1wbrS #Australia #GDPDecline

📊 GDP Update: March Quarter 2024 Australia's GDP rose by 0.1% in the March quarter and 1.1% since March 2023 (seasonally adjusted, chain volume measure), per Australian Bureau of Statistics. 🔹 Government Spending: Up 1.0%, driven by increased spending on medical services and energy bill relief payments. 🔹 Household Spending: Rose 0.4%, led by essentials like electricity, health, rent, and food. Discretionary spending on travel and entertainment also increased. 🔹 Capital Investment: Fell 0.9% due to declines in non-dwelling and public sector investment. However, machinery and equipment investment saw a rise. 🔹 Net Trade: Subtracted 0.9 percentage points from GDP, with imports (+5.1%) growing faster than exports (+0.7%). 🔹 Inventories: Increased by $2.2 billion, contributing 0.7 percentage points to GDP growth. 🔹 Compensation of Employees: Rose 1.0%, indicating a slowdown in labour market growth. 🔹 Household Saving Ratio: Dropped to 0.9%, the lowest since December 2021, reflecting slow income growth. Despite challenges, overall investment remains high, exceeding levels seen during the early 2010s mining boom. #Economy #GDP #Australia

The most important figures from the GDP data, to my mind. 1. GDP per person fell. We are in a per capital recession. Immigration is the only reason Australia is not technically in a recession. 2. GDP per hour fell. Productivity is not improving. This underscores why it is difficult for the RBA to cut rates. Elsewhere in the data, we see that private spending is anemic. Government spending is increasing. This is bad because the government is inefficient and exhibits severe agency conflicts: Government has no skin in the game when it wastes money. Indeed, there is an incentive to pork barrel. Thus, it can exacerbate the interest rate/inflation situation.

Australia received a just-fine GDP print yesterday, despite all the handwringing to the contrary. At this point in the cycle the economy really should be in recessions, the fact that it is still growing at all is a win. While the headline number is interesting, there are three far more important key takeaway from the national accounts that we should be focused on: 1️⃣ Government spending is generating significant excess demand that is extending our inflation crisis. While household and business spending have moderated under tighter monetary policy, government spending continues to grow unabated. A little bit of fiscal conservatism from state and federal government to help the RBA would be sensible right now. 2️⃣ Labour productivity remains disastrously bad. Productivity fell 0.8% QoQ in Q2 and has shows no progress since 2017. Once again the government is to blame with a raft of productivity destroying industrial relations and business regulations introduced over the last decade. We desperately need a productivity reform agenda from government, focused around rapid deregulation of our IR and trading environments and a productivity forced revamp of our tax code. Without productivity growth, there is no sustainable way to grow real wages or maintain a globally competitive economy. 3️⃣ A distinction needs to be made between households choosing not to spend and household decreasing spending because they do not have the money. The majority of our downturn in household spending is the former. Household balance sheets are strong and household cash savings continue to grow (up over $20 billion last month). As soon as confidence improves, there is a significant risk that household spending grows strongly, putting us straight back into an inflation crisis.

Wages Growth Slows: A Glimmer of Hope for Interest Rates? 📉🔍 In a recent turn of events, the pace of wages growth in Australia has decelerated for the second consecutive quarter, as reported by the Australian Bureau of Statistics. With a rise of just 0.8% in the March 2024 quarter, following increases of 1.2% and 1.0% in the previous two quarters, it seems inflationary pressures might be easing—a potential sigh of relief for interest rates. Over the past year, wages climbed by 4.1%, surpassing the inflation rate of 3.6%. This means that, in real terms, Australian workers have seen their purchasing power increase. 📈💼 The Reserve Bank of Australia (RBA) continues its efforts to bring inflation within the ideal range of 2-3%. With the economy needing a gentle pullback to achieve this, slowing wage growth could be a critical factor for the RBA's future rate decisions. If the trend of easing inflation continues, we might even see discussions about rate cuts soon. What does this mean for homeowners and investors? A stable or declining interest rate environment could enhance borrowing conditions and influence decisions in the real estate and investment sectors. What to know how much you can borrow? 📧DM me or email andrewdihm@flintgroup.au #AustralianEconomy #InterestRates #WageGrowth #Inflation #RBA #RealEstateInvesting

Key points of Australia's December quarter real GDP release: Real GDP in the December quarter expanded by 0.2%qoq and 1.5%yoy through the year. The RBA’s forecast for the quarter growth was 0.3%qoq and 1.5%yoy so policy implications are few. The household sector was very weak as higher rates and cost of living issues continue to impact. Dwelling investment went backwards, but solid growth in business investment was a positive. Nonetheless private demand overall was flat in the quarter, the public sector added modestly yet after inventories subtracted gross national expenditure contracted 0.2%qoq, only a solid contribution from net exports kept headline GDP positive. Notable at the headline level was the economy recorded its fourth consecutive reversal in per capita growth GDP (1.0%yoy lower) an unusual occurrence outside a traditional headline technical recession. And even then has not happened since 1982-83. Underscoring again how population growth is the key driver of GDP growth and without it the economy would be in recession. The adjustment in hours worked was again highlighted in the national accounts falling 0.3%qoq after a 0.7%qoq decline in Q3, with growth still modestly positive this resulted in an improvement in Australia’s  beleaguered productivity performance. This is ‘forced’ productivity is stemming from the RBA’s policy settings squeezing business rather than from any proactive reform or importation of productivity enhancing technology or other improvements. IFM Investors #Australia #economy #australianeconomy #GDP #growth #ifmeconomics Frans van den Bogaerde, CFA Christopher Skondreas

This week’s GDP data release presents a stark reminder of the underlying economic challenges we face. Much like an iceberg, the true enormity of our economic situation lies beneath the surface. While the headline figures may capture immediate attention, a closer look at GDP per capita reveals a sobering reality. https://lnkd.in/gsWE7pHP Canny View: What is GDP and why is it important?