Weak growth anticipates worse to come, given the promise of further RBA hikes and the economy has already begun to fall
n seeing the latest GDP figures, the best that you can say is that you hope the Reserve Bank is happy. The economy is slowing as the impact of the interest rate rises has hit households so strongly that, taking into account population growth, Australia’s economy didn’t grow at all in real terms in the last three months of 2022.
What an achievement! Who would have guessed that raising the cash rate by 300 basis points from 0.1% in May to 3.1% in December would slow the economy so much? Well, apart from anyone who has the slightest bit of memory of what has happened in previous times when interest rates rose so quickly., the RBA predicted annual GDP growth to December 2022 would be 2.7%, and so it was.Before I delve into the weeds of these figures, let’s get one thing straight – an economy growing at just 0.5% in a quarter, as it did in the December quarter, is terrible. Add in that per capita growth was totally absent and you have an economy already stalling.
And it is likely that the impact of around 100 basis points worth of interest rates rises has yet to really show up in the figures, which means there is a danger of this 0.5% growth being a high point.Lucky the imports delivered so much growth!In the December quarter, Australia imported 4.3% less stuff than we did in the September quarter. Because the money you pay for imports leaves Australia, imports actually lower GDP. And so when you import less it is good for GDP growth.
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