By Poppy Johnston in Canberra

Australia’s economy is still growing – but only just – though economists are unconvinced the weaker-than-expected data will bring forward keenly-anticipated interest rate cuts. 

Full-year growth fell to 0.8 per cent in September, down from one per cent in June and below the 1.1 per cent consensus forecast.

Australian Bureau of Statistics head of national accounts Katherine Keenan said the nation’s economy grew for the 12th consecutive quarter but has been slowing since September 2023.

Viewed quarterly, the bureau recorded a minor improvement, with the economy growing 0.3 per cent in the September quarter, up from 0.2 per cent in the three months to June.

Governments were once again big contributors to economic activity, with defence spending behind a sizeable 5.3 per cent lift in public investment over the quarter.

Moody’s Analytics head of China and Australia economics Harry Murphy Cruise said cost-of-living measures such as energy bill relief took a chunk of what would usually be considered household spending and put it on governments’ books.

“That switcheroo, combined with tax cuts, freed up finances that could have been used on other goods and services,” he said on Wednesday.

But households didn’t go on a spending spree – instead choosing to build up savings buffers and pay down mortgages.

“That kept household spending flat through the September quarter and pushed the household saving ratio to its highest since the end of 2022,” Mr Murphy Cruise said.

With the Reserve Bank of Australia trying to engineer a slower economy to curb inflation by keeping interest rates elevated, the level of government spending has become a source of debate.

Though some economists argue public spending is keeping Australia out of recession, others warn it’s contributing to inflationary pressures and keeping interest rates higher for longer.

Shadow Treasurer Angus Taylor said the federal government had “lost control” of its spending and there was “no comfort in these numbers for the Reserve Bank”.

“Our standard of living has seen the biggest fall of any of our peer countries since Labor came to power, the biggest fall in the OECD,” he told reporters in Canberra.

Treasurer Jim Chalmers said a coalition government would slash spending if it was returned to power, posing a bigger risk to the economy and household finances.

“That’s why (opposition leader) Peter Dutton and the Liberals and Nationals pose such a risk to household budgets, they don’t support cost-of-living help, they want to pull $350 billion out of the economy at the worst time,” Dr Chalmers told reporters.

The most encouraging aspect of the national accounts was improving household incomes, he said.

“Because at the intersection of wages growth, moderating inflation and tax cuts, we see the beginnings of a recovery in living standards, which were falling substantially when we came to office,” the treasurer said.

AMP deputy chief economist Diana Mousina said the national accounts provided important information about the health of the economy but the numbers were backwards-looking and unlikely to heavily influence the RBA’s thinking.

“So while the outcome came in below the RBA’s forecasts, the central bank will not take today’s data as a sign for a near-term rate cut,” she wrote in a note.

“The RBA is still concerned that underlying inflation in the economy is too hot and is not convinced that it is headed down sustainably.”