Australian economy grew 0.1% in the March Quarter

Australian gross domestic product (GDP) rose 0.1 per cent in the March quarter 2024 and 1.1 per cent since March 2023 (seasonally adjusted, chain volume measure), according to figures released by the Australian Bureau of Statistics (ABS) today. 

Katherine Keenan, ABS head of national accounts, said: “GDP growth was weak in March, with the economy experiencing its lowest through the year growth since December 2020. GDP per capita fell for the fifth consecutive quarter, falling 0.4 per cent in March and 1.3 per cent through the year.”

Domestic final demand was subdued this quarter, growing 0.2 per cent. The rise in imports of goods and services was offset by an increase in exports and change in inventories.

Government final consumption expenditure rose 1.0 per cent in March. Both national (+1.2 per cent) and state and local (+0.8 per cent) spending contributed to this increase.

“Government benefits for households drove the growth in government spending, as the federal government increased spending on medical services and some State governments provided energy bill relief payments,” Ms Keenan said.

Household spending rose 0.4 per cent in the March quarter. 

“Essential categories like electricity, health, rent and food drove growth again this quarter. 

“We also saw increases in some discretionary categories because of overseas travel and spending on gambling, sporting and musical events,” Ms Keenan said.

Total capital investment fell 0.9 per cent.

“Private investment fell by 0.8 per cent driven by a decline of 4.3 per cent in non-dwelling investment. This was due to a reduction in mining investment as well as a reduction in the number of small to medium building projects under construction compared to December,” Ms Keenan said.

Total dwellings (-0.5 per cent) and ownership transfer costs (-2.2 per cent) also detracted from private capital growth, reflecting falling building approvals and subdued activity in the property market.

Machinery and equipment partly offset these falls, rising 2.2 per cent, after a fall last quarter due to increased data centre and transport equipment investment.

Public capital investment fell for the second straight quarter, driven by reduced state and local public sector investment. Water, energy, transport, health and education infrastructure all contributed to this drop.

“Despite the falls in public and private investment, the level of overall investment remained high and continued to exceed mining investment boom levels seen in the early 2010’s,” Ms Keenan said.

Net trade detracted 0.9 percentage points from GDP growth this quarter, with stronger imports (+5.1 per cent) than exports (+0.7 per cent).

Goods imports rose 6.5 per cent as consumption and capital goods all increased. Services imports rose 0.7 per cent, driven by transport services, while travel services saw its second quarterly fall as travellers reduced their overseas spending.

Goods exports rose 1.1 per cent, driven by liquified natural gas, non-monetary gold and meat. These increases were partly offset by falls in exports of coal and other rural goods. Services exports fell 1.1 per cent, mainly due to a fall in travel services.

Change in inventories rose $2.2 billion in the March quarter, contributing 0.7 percentage points to GDP growth.

Wholesale and retail inventories run down last quarter were rebuilt with the increase in imports. Metal ore and non-metallic mineral mining drove the rise in mining inventories, as production rose more than demand.

This reduced demand for mining commodities led to a 5.3 per cent fall in mining profits this quarter, after a 7.9 per cent rise last quarter.

Compensation of employees (COE) rose 1.0 per cent in the March quarter, the smallest growth since September 2021. This indicates slowing growth in the labour market.

Private sector wages rose 0.9 per cent, driving the growth in total compensation of employees, and public sector wages rose 1.6 per cent. Pay rises and backpay across federal, state and territory governments contributed to this overall growth.

The household saving ratio fell to 0.9 per cent in the March quarter after rising last quarter.

“Household income received grew at its lowest rate since December 2021, reflecting the relatively small rises in compensation of employees and investment income received this quarter.

“Compared to last quarter, the growth in income tax payable did not detract as much from total income payable by households, resulting in a lower household saving ratio,” Ms Keenan said.