Stalling consumer spending is a major factor behind this morning’s figures, says UNSW Business School’s Richard Holden.
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“As we near the federal budget 2019, today’s GDP figures show the economy is sputtering along,” says Richard Holden from the UNSW Business School. “GDP growth of 0.2% is very poor.
“The ability of Australia’s economy to avoid recession for 27 years is great, but today’s ABS figures show we’ve now entered an effective recession in Australia, with GDP per capita shrinking in both Q3 and Q4 of 2018. Two quarters of negative growth – that’s a recession on a per capita basis – and the figures show a large part of that is consumer spending, growing at only 0.4 per cent in Q4. It’s a huge slice of the economy at almost 60 per cent of GDP, but it has stalled.”
Removing the population growth in Australia of about 0.4% from the headline GDP figure of 0.2% seasonally adjusted in Q4 of 2018 shows that growth is negative.
Professor Richard Holden
Professor Holden says that with inflation at historically low levels, and low wage growth, GDP should be much more than its current headline level of 2.3% annually.
“Given the level of unemployment in Australia, how wages growth is persistently weak, and stubbornly low inflation, the economy should be roaring along. It’s not. This gives us further evidence that secular stagnation has hit Australia,” he says.
He warns that Australia’s nearly three decades of uninterrupted economic growth is likely to come to a halt at some point.
“We could have a severe downturn in our main trading partner, which is China. War in India might spark global financial turmoil.”
The federal budget on 2 April 2019 will no doubt have further goodies for voters in the run-up to the election, he says, and Australian taxpayers are unlikely to face a rise in taxes.
“After all, the increase the Medicare Levy was axed last year,” he says.
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