<?xml version="1.0" encoding="ISO-8859-1"?> <docID>328352</docID> <postdate>2024-09-04 15:00:35</postdate> <headline>Economy stuck in slow lane as households tighten belts</headline> <body><p><img class="size-full wp-image-328353" src="https://citynews.com.au/wp-content/uploads/2024/09/Economy-resized.jpg" alt="" width="900" height="637" /></p> <caption>Cartoon: Paul Dorin</caption> <p><span class="kicker-line">By <strong>Poppy Johnston</strong> in Canberra</span></p> <p><strong>Cash-strapped households are cutting back on non-essential items to pay for basics, weighing on economic growth.</strong></p> <p>A paltry 0.2 per cent growth over the three months to June was supported by firm government spending, including on health.</p> <p>Through-the-year growth was one per cent, the <a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/jun-2024">Australian Bureau of Statistics reported on Wednesday</a>.</p> <p>Head of national accounts at the bureau, Katherine Keenan, said annual financial-year economic growth was the lowest it had been since the recovery from the 1991 recession, excluding the pandemic.</p> <p>Sluggish growth was anticipated as interest rates have been kept high to take the sting out of elevated inflation, with the latest numbers landing broadly in line with analyst expectations.</p> <p>Treasurer Jim Chalmers said the main takeaway from the national accounts was a 0.2 per cent fall in household consumption, with people pulling back on discretionary items to afford essentials.</p> <p>Combined with the lowest annual household savings ratio in 17 years, Dr Chalmers said households were clearly under pressure.</p> <p>"It justifies our economic plan which is all about fighting inflation without smashing an economy which is already weak, and helping people doing it tough," he said on Wednesday.</p> <p>The opposition accused Labor of spending too much and called for austerity to contain inflation.</p> <p>The shadow treasurer said Dr Chalmers was "fighting the laws of economics" rather than persistent price pressures.</p> <p>"The government is hitting the accelerator at the same time as the Reserve Bank is hitting the brake, and that is how you wreck the engine," Angus Taylor said.</p> <p>A 1.4 per cent rise in government spending showed up in the latest figures.</p> <p>Health services contributed to the increase, which Dr Chalmers said included "unavoidable" spending on everyday services Medicare and the NDIS.</p> <p>Higher wage bills at state and council level also contributed to the increase.</p> <p>The RBA was bracing for another weak set of growth data and Betashares chief economist David Bassanese said the result was broadly in line with its expectations.</p> <p>"It's just what the RBA still feels is required to ensure inflation continues to trend lower this year – in which case, the RBA could ease it's foot of the brake with a rate cut early next year," Mr Bassanese said.</p> <p>The fall in private consumer spending was in part a correction to a Taylor Swift-inspired boost in spending during her tour earlier this year.</p> <p>"All up, today's GDP results, although soft, are not weak enough to bring forward the timing of possible RBA rate cuts – as it was in line with RBA expectations and is exactly what it still thinks is necessary to bring inflation down."</p> <p>Deloitte Access Economics partner Stephen Smith warned Australia's per capita recession had deepened, with growth in decline for the sixth quarter in a row when accounting for population growth.</p> <p>The June quarter release ran counter to the RBA's concerns about "homegrown" inflation fuelled by resilient demand, Mr Smith said.</p> <p>The central bank maintains underlying price pressures are still strong and has kept its options open on its next interest rate moves, while pushing back on expectation of near-term cuts.</p> <p>Mr Smith warned another rate rise would cruel the economy, urging the central bank and governments to pivot from containing inflation to stimulating growth.</p> <p>https://citynews.com.au/2024/cost-of-living-puts-the-brakes-on-new-vehicle-sales/</p> </body>