Australia’s GDP rose by 0.1% in Q1 ’24

Australia’s economy grew by only 0.1 per cent in the first quarter, below expectations and raising concerns about a potential recession, Reuters reported on Wednesday. High borrowing costs and inflation are impacting consumer spending.

This is the slowest growth in three decades, with annual growth dropping to 1.1 per cent from 1.5 per cent the previous quarter, according to data released by the Australian Bureau of Statistics.

Household spending, the engine of the Australian economy accounting for half of GDP, grew at a tepid 1.3 per cent. This increase was primarily driven by essential items like electricity and healthcare, with discretionary spending showing almost no growth over the year.

The outlook for future spending power is even bleaker, with the savings rate plummeting to a record low of 0.9 per cent. This significant drop follows downward revisions to past savings data.

Financial markets are currently not anticipating any further hikes in the Reserve Bank of Australia’s (RBA) cash rate, which currently sits at 4.35 per cent.

However, the prospect of a rate cut also appears distant. Futures markets suggest a roughly 50 per cent chance of a change in December, with a full cut to 4.10 per cent not priced in until May next year.

The latest consumer price inflation report in April revealed a surprising rise to 3.6 per cent, driven by a broad-based increase in costs across various sectors, including food, healthcare, clothing, and travel.