First impressions: Australian national accounts, June quarter 2024

By Pat Bustamante Senior Economist, Westpac

The Australia economy remains sluggish, growing just 0.2% in the June quarter, with increased spending by governments and foreign students and visitors driving most of the gain. The big surprise was the consumer. Consumer spending declined 0.2% in the June quarter – the biggest quarterly decline outside of COVID since the GFC.

The Australia economy grew 0.2% in the June quarter. Increased spending by governments and foreign students and visitors drove much of the gain. The outcome was broadly in line with Westpac’s forecast of 0.3%qtr and the market forecast of 0.2%qtr.

Private spending by consumers and businesses continues to be weak, growing just 0.2% in the June quarter. The weakness in consumer spending was the biggest surprise, down 0.2% in the June quarter to be just 0.5% higher in annual terms. With population growth running at around 2.5%, this means that per capita spending declined 2.0% over the past year.

Household real disposable income continued to stabilise for the third consecutive quarter, although it remains a massive 4.7% lower than September quarter 2023. It appears households are using this stabilisation in real incomes to buy essentials, with the household savings ratio holding flat at 0.6% in the June quarter. Our estimates suggest about half of the extra savings accumulated across the wider household sector during the COVID period have now been run down.

We are seeing increasing signs that the weakness in consumer spending is spilling over into businesses, particularly those at the coalface of the consumer-led slowdown, with new business investment up just 0.1% in the June quarter, to be 2.2% higher in annual terms.

In stark contrast, total new spending by governments continues to grow strongly and is now at a record share of the economy (27.3% of GDP from the previous peak of 27.1% of GDP in the September quarter 2021). Higher public sector wages on the back of upgraded enterprise bargaining agreements supported increased spending in the quarter. Further growth is expected next quarter as the cost-of-living measures announced in recent budgets come into effect.

Net exports and inventories were broadly as expected. Net exports contributed 0.2 ppts to growth in GDP in the June quarter, on the back of increased spending by foreign students and visitors. Inventories detracted 0.3 ppts from growth in the June quarter, with the private sector maintaining its stock of inventories following a big increase in the March quarter, and the public sector replenishing its stock after a run down in Q1.

In year ended terms, the economy grew 1.0% in the June quarter, down from 1.3% in the March quarter. This was in line with Westpac’s forecast of 1.0%yr and slightly above the 0.9%yr increase expected by the market. As we foreshadowed, upward revisions to historical estimates of business investment and public demand increased the year ended number.

Cost pressures continue to moderate with average (non-farm) earnings per hour increasing 1.3% in six-month annualised terms, down from 3.7% in the March quarter and lower than the pre pandemic average of 1.8%. This is leading to a moderation in unit labour costs (a key measure of domestic cost pressures). ULCs are now running at 3.4% in six-month annualised terms, broadly in line with the March quarter – at 3.4%, this is in line with the outcomes recorded over 2019 when underlying inflation was below the target band.

The number of hours worked in the economy was 0.5% in year ended terms, higher than the flat outcome implied by the labour force survey. With the economy expanding 1.0%yr, labour productivity grew 0.5% over the year to the June quarter. The labour productivity outcome was better in the non-mining sector of the economy (up 0.7%yr) and in the market sector (up 1.0%yr). Measurement difficulties associated with measuring output in the non-market sector (health care, education etc) could be weighing on productivity. 


More analysis to follow. 

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