Australian GDP Q1 2024: weak growth and high interest rates
While this is the ninth consecutive quarterly increase, higher interest rates continue to pressure households. Katherine Keenan of the ABS comments on the weak GDP growth, and the RBA's upcoming meeting looms large.
GDP growth sluggish as household pressures mount
Australia's economy expanded at a sluggish 0.1% pace in the first quarter of 2024, marking an annual growth rate of just 1.1% - one of the weakest readings since the pandemic recovery began. The subpar figures reflect the mounting pressures on households from sustained high inflation and successive interest rate hikes by the Reserve Bank of Australia (RBA).
"GDP growth was weak in March, with the economy experiencing its lowest through-the-year growth since December 2020," said Katherine Keenan, ABS head of national accounts, highlighting the challenging environment.
Key details
- Per capita GDP growth: fell by 0.4% QoQ, marking the fifth consecutive quarterly decline, deepening the "per capita recession."
- Household saving-to-income ratio: decreased to 0.9%, its lowest since December 2021, as nominal household consumption rose faster than gross disposable income.
- Household spending: increased by 0.4%, driven by rises in essential categories such as electricity, rent, food, and health.
- Discretionary spending: households reduced spending in areas such as overseas travel and expenditures on gambling, sporting, and musical events.
GDP data confirms moderating demand
The RBA had already revised down its consumption forecasts in May, acknowledging the weaker outlook. Today's soft GDP print aligns with expectations of a further moderation in demand as interest rates continue to take a toll. The rates market maintains about a 35% probability of a 25 basis point rate cut by the RBA in December, unchanged after the GDP release.
Investors will closely watch the upcoming May jobs report on June 13 for clearer signals on the central bank's next policy move.
Recent history of AU GDP:
- Q1 2023: 2.4%
- Q2 2023: 2.1%
- Q3 2023: 2.1%
- Q4 2023: 1.5%
- Q1 2024: 1.1%
Australian GDP growth rate (quarterly)
The market reacts
- AUD/USD: Has bounced about 15 pips from 0.6646/48 to 0.6661/63. It still faces significant resistance between 0.6720/30 amid falling commodity prices.
- ASX 200: Has fallen 4 points from 7757 to 7753, but remains in positive territory for the day.
ASX 200 daily chart
- Source: TradingView. The figures stated are as of 5 June 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.
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