Today’s ³Ô¹ÏÍøÕ¾ Accounts confirms growth in the Australian economy is moderating as expected, with substantial and growing challenges in 2023.
This is an inevitable consequence of a global economic slowdown, high inflation, rising interest rates and an international energy crisis.
These numbers reflect the reality of rising interest rates and capture the impact of the cost‑of‑living pressures affecting Australians.
Despite these challenges, the Australian economy grew by 0.5 per cent in the December quarter to be 2.7 per cent higher through the year.
Over 2022, the Australian economy performed better than any of the major advanced economies, and more than double the OECD average.
Household consumption softened in the quarter, growing by 0.3 per cent to be 5.4 per cent higher through the year. Consumers have pulled back on discretionary goods, as they continue to spend more on services, including domestic travel.
Australians are spending less on renovating their homes, which contributed to a decline in dwelling investment in the quarter. But construction in new dwellings rose in the quarter as supply constraints eased and there is a solid pipeline of work to be done.
With growing pressures on household budgets, we are seeing households save less out of their income than has recently been the case, with the saving ratio falling to 4.5 per cent ‑ just below the levels we saw before the start of the pandemic.
More household income is being directed to meeting higher mortgage interest repayments, which were 23 per cent higher in the quarter, and 85 per cent higher through the year.
We continue to see further signs of strengthening wages growth in today’s figures, with compensation per employee up 4.4 per cent through the year.
Today’s figures show that new business investment fell by 0.8 per cent in the quarter, as several large construction projects were completed, and new projects have not yet come online.
There was a welcome recovery in tourism and education exports which continue to bounce back from the pandemic. Overall, net exports contributed 1.1 per centage points to growth in the quarter.
Inflation remains the defining challenge for our economy in 2023. While we are cautiously optimistic it has peaked, it will still be higher than we would like for longer than we would like.
We welcome indications from the monthly CPI indicator released today which suggests that inflation peaked towards the end of 2022.
The ³Ô¹ÏÍøÕ¾ Accounts measure of consumer prices, which rose by 1.5 per cent in the quarter and 6.9 per cent through the year, is broadly consistent with the December quarter CPI.
The government has the right economic plan for the challenging times we are in.
We are focused on addressing inflation with responsible cost‑of‑living relief, repairing our broken supply chains, and demonstrating spending restraint in the Budget – and we’re building the resilience of the economy to withstand future economic shocks.
2023 will be a difficult year – but the Australian people, and their government, are up for this challenge.
