06 December 2023

The National Accounts show the Australian economy is slowing in expected ways as an inevitable consequence of higher interest rates and international uncertainty.

National Accounts – September quarter 2023

The National Accounts show the Australian economy is slowing in expected ways as an inevitable consequence of higher interest rates and international uncertainty.

The economy grew by 0.2 per cent over the September quarter, to be 2.1 per cent higher through the year.

We have known for some time that the combination of high interest rates, high but moderating inflation and continuing global uncertainty, including the downturn in the Chinese economy, would slow growth in our economy – and we expect to see some further moderation to annual growth over the year ahead.

In these difficult times, households are under acute pressure from the cost of living and the burden of higher interest rates.

Household consumption was flat in the quarter with Australians having to make room for mortgage interest payments, which reached nearly $30 billion in the quarter.

People are stretching their incomes further, with the household saving ratio declining to 1.1 per cent, the lowest level since 2007. The data since the September quarter confirms the slowdown in consumption, with retail sales going backwards in October.

While this softening in household consumption is not surprising, the outcome this quarter partly reflects the positive impact of the Government’s cost of living measures, including energy bill relief and increased childcare subsidies in the quarter.

As the ABS highlighted, these measures have the effect of reducing household spending in the National Accounts and are recorded as government consumption.

We know people are doing it very tough because of higher interest rates and international uncertainty, but welcome and encouraging progress is being made on the economy more broadly, even as it slows in expected ways.

Inflation is moderating, wages are rising with two consecutive quarters of real growth, the gender pay gap is the smallest it’s ever been, unemployment has a three in front of it with faster jobs growth since we were elected than in any major advanced economy, we’ve delivered the first surplus in 15 years and much smaller forecast deficits in the coming years mean much less debt and tens of billions of dollars saved in interest costs.

Australia’s economy grew faster than most of the major advanced economies through the year to the September quarter – faster than Germany, the United Kingdom, France, Canada and Italy.

Compensation of employees grew 2.6 per cent in the quarter, to be 8.4 per cent higher through the year. The ABS highlighted the impact of the minimum wage rise in contributing to this outcome – a decision the Government supported and advocated for.

Business and public investment was a key driver of growth in the quarter, contributing 0.2 percentage points. This pick‑up in investment is expanding capacity and will help build a more productive economy in the years ahead.

New business investment grew by 0.6 per cent in the quarter, to be 8 per cent higher through the year. This measure has increased in every quarter since the election – by contrast, new business investment did not grow in any quarter of the first term of the former government.

We continue to see a welcome boost from the arrival of tourists and international students, with services exports growing 36.1 per cent through the year.

This helped offset some of the detraction from net exports, which was due to strong import growth as more Australians holidayed overseas and easing supply chains supported the delivery of vehicles.

Since coming to government, our three-part economic plan has been focused on providing targeted cost-of-living relief, repairing the budget, and investing in skills, housing and energy to lay the foundations for future growth.

Our fiscal strategy and approach to tackling the inflation challenge has been endorsed by the RBA Governor, the IMF, the OECD, Deloitte Access Economics and Westpac, and was a reason why Fitch maintained our AAA credit rating.

The Albanese Government’s economic strategy is designed to see Australians through these hard times and set our economy and our country up for lasting success.