Sluggish Australian Economy: Q1 GDP Growth at 0.2%, Indicating Market Concerns

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Australia’s economic growth has slowed to its weakest pace in 1.5 years during the last quarter, as indicated by data released by the Australian Bureau of Statistics. 

The data reveals that Australia’s gross domestic product (GDP) increased by a modest 0.2% in the first quarter, down from 0.5% in the previous quarter and below the projected 0.3%. Furthermore, the annual growth rate for the country came in at 2.3%, falling short of the expected 2.4% expansion.

“This is the sixth-straight rise in quarterly GDP but the slowest growth since the COVID-19 Delta lockdowns in September quarter 2021,” Katherine Keenan, the head of National Accounts at the ABS, said.

Significantly, the report highlights a modest easing of domestic price pressures as prices experienced a slower growth rate of 1.1% in contrast to the previous quarter’s 1.4% rise. Yet, households adapt to high costs and rising mortgage rates by reducing their savings.

Driven by challenging economic conditions and price pressures, the Reserve Bank of Australia (RBA) increased its cash rate by 400 basis points since last May, hitting an 11-year peak at 4.1%. The RBA suggests possible further tightening measures if necessary, while market expectations point to a 60% likelihood of another interest rate hike in July.

Another problematic aspect revealed in the report is the  2.4% increase in the first quarter in compensation of employees (COE), a comprehensive measure of labour costs across the economy.

Moira Linton, who operates a demolition company in Melbourne, has experienced a significant decline in the pace of her business activities.

“This has been the worst I’ve ever seen, and I’ve been in nearly 15 years now; this is by far the worst.”

As Australia’s economy grapples with sluggish growth, the government and policymakers must closely monitor and implement measures to address the challenges consumers and businesses face.

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