Growth rate plummets as economists raise concern

A U S T R A L I A ’ S e c o n o m i c growth has slowed to its weakest pace in almost eight years and there are concerns weak housing investment and consumer spending will prevent a swift improvement.

Growth of 0.3 per cent in the March quarter took the annual rate of growth to 1.7 per cent, Australian Bureau of Statistics data showed yesterday, and Australia has now gone 103 quarters, or more than 25 years, without a recession.

The numbers are slightly better than the 0.1 per cent quarterly growth forecast by economists, and the 1.4 per cent predicted for the year to March, and pushed the Australian dollar higher.

They also settled, for now, speculation about the RBA potentially cutting interest rates.

Growth was impacted by bad weather, which restricted commodity shipments and housing construction, and Cyclone Debbie’s impact on exports and construction is likely to carry over into the June quarter.

However, economists warn the data points to a broader economic slowdown.

“Some of the main growth drivers of the economy in recent years, including residential dwelling investment and exports, reversed in the March quarter,” St George senior economist Jo Horton said.

“Dwelling investment, which has supported the transition from mining investment- led growth, is close to a peak and its role of support for economic growth is likely to fade later this year.”

There was a 4.4 per cent drop in dwelling construction, a 3 per cent fall in spending on machinery and equipment and a 2.7 per cent contraction in government spending.

Household consumption grew by 0.5 per cent in the March quarter, down from 0.9 per cent growth in the preceding three months, and exports fell 1.6 per cent in the quarter.

Wage growth continued to be anaemic and the household savings rate slipped to 4.7 per cent in the quarter, and is now down more than 2 percentage points over the last 12 months.