‘Doesn’t Tell the Full Story’: Treasurer Hits Pause on Celebrating Latest GDP Growth

New figures released by the Australian Bureau of Statistics show that Australia’s Gross Domestic Product (GDP) rose 0.9 percent in the June Quarter for 2022, with the bump in the economy driven in part by increases in household spending and exports seeing its largest quarterly rise since the Sydney Olympics in 2000.

It marks the third consecutive quarter to see such economic growth since a contraction in the September Quarter for 2021, largely as a result of COVID outbreaks attributed to the Delta variant. Household spending is one of the key factors in driving the latest GDP growth, rising by 2.2 percent in the June Quarter, with experts pointing to the gradual emergence from the pandemic as playing a major role.

“Households increased spending on domestic and international travel as COVID restrictions further eased and international borders remained open,” says Sean Crick, head of National Accounts at the Australian Bureau of Statistics, “[But] while spending on transport grew strongly, households were still only spending two thirds of what they did pre-pandemic.”

The flip-side to increases in household spending, however, is the third consecutive quarterly decline in household savings to income ratios, falling from 11.1 percent to 8.7 percent in the quarter to June.

Federal Treasurer Jim Chalmers celebrated the economic growth, but moved to temper excitement and expectations responding to the figures’ release, acknowledging changes to the economy since the conclusion of the quarter from which the figures are drawn.

“This is an economy which is growing, but the challenges are growing as well,” Chalmers said on Wednesday, “I think Australians know that in the more than two months since this data, some of the pressures on them and on our supply chains have grown. And that’s been a consequence of rising interest rates, a deteriorating global situation and, of course, high and rising inflation.”

The Treasurer pointed to the decline in the household savings to income ratio, particularly, as demonstrating some of the constraints and challenges being faced by Australians in the economy.

“What this shows is that while households on average are still saving, they’re saving less,” Chalmers said, “And we also know that they’re impacted by the rising cost of living and the fact that their real wages are falling as a consequence of that.”

“We saw company profits reach record highs as a percentage of GDP, but real household disposable incomes fell for the third consecutive quarter by 0.5 percent in the June quarter and while there are some welcome and encouraging science that wages are starting to pick up, there is no significant measure of wages growth that tells us anything other than real wages are still falling given the high and rising inflation that we confront in our economy.”

Despite the challenges, the Treasurer made a point to suggest actions such as last week’s Jobs and Skills Summit as reflecting the Labor government’s interest in addressing rising pressures facing Australian consumers and the Australian workforce, with an eye to easing cost-of-living pressures for households and businesses.

“We’re doing what we can to ease the skills and labour shortages, to ease the cost of living where we responsibly can, and to get wages moving again. We made important progress as you know at the jobs and skills summit last week,” Chalmers said, “We’ve begun the important work to bring people together to see what we can achieve together to take some of the pressure off Australians and take some of the pressure off the economy as well.” 

“So these numbers today are new numbers but they’re telling a story which is now pretty familiar to us – a growing economy, but we want to see more Australians benefit from that growth. Different pressures are hitting the economy, but our future is still packed with potential.”

The Reserve Bank of Australia has suggested that they expect GDP growth to slow from here, as a result of rate increases and rising inflation, as the markets await RBA Governor Philip Lowe’s Anika Foundation address on Thursday as the central bank continues to look at ways to cool rising inflation rates. 

The news is mixed for retailers and consumers alike, with challenges and pressures in the economy growing alongside some optimism for future potential, as we enter the final month of the current financial quarter.

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