Slow growth a poll issue

Data undermines Coalition economic credentials

AUSTRALIA’S economic growth ground to a near halt in the second half of 2018, official data showed yesterday, thrusting the issue to the front and centre of an already contentious general election campaign.

The figures released by Australia’s statistics agency showed growth for October to December at 0.2 per cent, after a 0.3 per cent reading in the previous three months.

Prime Minister Scott Morrison (right) has based his reelection campaign on stewardship of the economy and allegations that a Labor government would spell an end to 28 years of continuous growth. The Prime Minister has particularly taken aim at Labor’s tax policies, describing them as a threat to the economy.

The figures showed annual growth last year at 2.3 per cent, but with growth slowing considerably in the second half of the year as consumer spending weakened and storm clouds gathered in the long-booming housing market. Mr Morrison has opened his chequebook ahead of the election, which is expected in May, announcing funding for a slew of community programs. That appears to have been just enough to stop growth from grinding to a complete halt. Public expenditure jumped by 1.8 per cent for the period and contributed 0.3 percentage points to GDP growth, while household consumption came in at a soft 0.4 per cent.

The central bank on Tuesday kept interest rates at a record-low, but markets are increasingly expecting up to two rate cuts by the end of 2019.

“We believe the (Reserve) bank will be increasingly uncomfortable with the ‘growing tension between strong labour market data and softer GDP data’ as the weakness in household spending appears to be more persistent than it forecast,” National Australia Bank economist Kaixin Owyong said in a note to clients.

“Should the progress in the labour market falter over the next few months, the bank will likely be forced to cut rates to support households.”