The Australian economy experienced its slowest annual growth rate since the COVID-19 pandemic, with a growth rate of just over 1.5 percent in the year 2023, according to statistics from the Australian Bureau of Statistics (ABS). This marks a significant slowdown compared to the growth rates of 5.4 percent in 2021 and 2.4 percent in 2022. The GDP rose from $600.5 billion in December 2022 to $609.8 billion in December 2023.
The ABS reported that household spending only increased by 0.1 percent in the December quarter. While there was higher spending on essential categories such as healthcare and utilities, there was a decrease in spending on discretionary items like accommodation and arts and recreation services. Overall, household consumption only grew by 0.1 percent in the quarter.
Government spending and private business investment were identified as the main drivers of GDP growth in the December quarter. Government spending increased by 0.6 percent, primarily driven by government benefits for households and higher employee expenses across commonwealth departments. However, defense spending dropped by 3.5 percent during the quarter. On the other hand, business investment rose by 0.7 percent, with non-dwelling construction being a significant contributor.
ANZ economists commented on the figures, stating that they indicate a continued slowdown in growth over the second half of 2023, but do not change their view on the Reserve Bank of Australia (RBA) or the outlook for the economy.
Household spending was described as subdued by the ABS, with Australians focusing more on essential items like electricity, rent, food, and health, while reducing spending on discretionary areas such as hotels, cafes, restaurants, and new vehicle purchases. Spending on accommodation and food services fell by 3.2 percent in the December quarter.
Imports of goods and services recorded a significant drop of 3.4 percent in the December quarter due to fewer imports of consumption and capital goods. Goods and services exports also decreased by 0.3 percent, with a 0.4 percent drop in exports of goods. However, service exports increased by 0.5 percent.
Wages saw an increase of 1.4 percent in the December quarter and 8.4 percent since December 2022, driven by public sector wage increases. Public sector wages rose by 3.3 percent in the December quarter, the highest growth since March 2011.
Despite the challenges faced by the Australian economy, there were some positive signs. Household savings improved, with households saving 3.2 percent of their income in the December quarter. Additionally, visitors to Australia spent 1.2 percent more in the December quarter compared to before the COVID-19 pandemic.
Overall, the Australian economy experienced a slowdown in growth in 2023, with household spending remaining subdued and government spending and private business investment being the main drivers of GDP growth. However, there were positive developments in areas such as wages and household savings.
