The Australian economy slowed over the September quarter this year, according to figures released by the Australian Bureau of Statistics.
The figures reveal that Australia’s economy grew by just 0.3% after a 0.5% increase in the June quarter. The growth is well below the previous economic forecasts of 0.7%.
The economy has grown 2.7% over the past year, just below the decade-average growth rate of 2.8% and below the 15-year average of 3.0%.
Shane Garrett, senior economist for the Housing Industry Association, says this is an “unsettling update” on Australia’s growth pace.
“Coming at a time when a more downbeat perspective regarding Australia’s economic prospects was already in the ascendancy, an elevated focus on a possible further rate cut is likely to be one consequence of today’s result,” he said.
“Domestic demand appeared to be in poor shape in the September 2014 quarter, with declines affecting dwelling construction, government investment and private business investment. At this stage, exports are the crucial ingredient to keeping the economy on its feet, although new dwelling investment remains healthy in terms of annual growth.”
However, Craig James, chief economist for CommSec, says that while the results aren’t great, he isn’t quite as pessimistic.
“The economy has continued to grow, and while growth is OK, it’s not great. The decade-average growth pace is 2.8% and current growth stands at 2.7%. In order to reduce unemployment, the economy needs to be growing by between 3.0-3.5%.
“The Reserve Bank has scope to cut rates if it wanted to, but we doubt that it would want to. Recent economic data has proved more positive and the fall in petrol price has potential to boost consumer and business spending. The lower Aussie dollar is also providing support to the economy.
“The economy is undergoing transition from mining to non-mining sectors and it is a case of so far, so good. Exports are lifting and boosting growth despite lower commodity prices restraining incomes. Latest data shows that employee compensation (or income) is up 3.2% over the year while household sector inflation is only 2%, so there is scope to lift spending.”
According to the figures, new dwelling investment contracted by 1.1% during the September 2014 quarter, while renovations activity experienced a decline of 0.7%. Compared with twelve months earlier, new dwelling activity was 10.2% higher, with renovations activity up by 1.5%.