The treasurer, Josh Frydenberg, has held out accelerated infrastructure spending as a possible salve for the Australian economy after growth slowed to 1.8% in the last year, the slowest since 2009.
The Australian economy grew by just 0.4% in the March quarter, contributing to a seasonally adjusted growth rate of 1.8%. The result contrasts with real GDP growth of 2.25% forecast in the budget, meaning the economy would have to grow by 1.3% in the last quarter of 2018-19 to meet the forecast.
The Australian Bureau of Statistics figures, released on Wednesday, also show that GDP per person fell for the third consecutive quarter, by 0.03%, extending the “per-capita recession” declared after last quarter.
Frydenberg told reporters in Canberra although annual growth had slipped from 2.4% to 1.8%, this was “within the range of market expectations” and comparable to other developed economies.
He pointed to existing measures including the $100bn 10-year infrastructure package and $1,080 of planned tax cuts for low- to middle-income earners as potential boosters for the Australian economy.
Frydenberg said the government would “always look for an opportunity” to bring infrastructure investment forward, such as commuter car parks, but blamed the Victorian government for failing to approve the East West Link and capacity constraints for the lack of shovel-ready projects.
The treasurer gave no other sign the Coalition would provide “additional fiscal support” or seek to reform the industrial relations system, non-monetary levers proposed by the Reserve Bank governor, Philip Lowe, to boost the economy.
The shadow treasurer, Jim Chalmers, said the Coalition’s economic credibility was in “tatters” and the annual growth rate was “feeble” – the worst since the global financial crisis.
“We have got a national economy which has gone from being the 8th fastest growing in the OECD in 2013 when the government changed hands, to now being the 20th fastest growing economy in the OECD,” he said.
The result was weighed down by falling dwelling investment (down 2.5% in the quarter) and slowing household consumption (down to 0.3%).
CommSec’s chief economist, Craig James, usually one of the most bullish forecasters in Australia, said: “The Aussie economy has lost momentum. And soft consumer spending is the main culprit.
“Both monetary and fiscal stimulus are needed to reduce unemployment and revive inflation. But businesses also need to respond through increased investment.”
In seasonally adjusted terms, household consumption grew by 1.8% for the last year, the lowest since June 2013, compared with 2.25% forecast for 2018-19 in the budget.
Government final consumption – particularly in disability and health services – grew by 0.8% in the March quarter and 5% through the year.
Compensation of employees increased by 1.2% in the March quarter, but the household saving ratio ticked up to 2.8%.
On Tuesday the Reserve Bank cut the cash rate to a record-low 1.25%, in a bid to bolster a softening economy, and further interest rate cuts are expected.
Ben Udy, an economist at Capital Economics, said the Australian economy is “off to a rough start in 2019” with falling house prices likely to blame for slower growth in household consumption.
“Overall, today’s data don’t inspire much confidence in the Australian economic outlook,” he said.
“And given that the housing downturn has so far continued in 2019 we don’t think that weakness was a one-off.”
Udy suggested the RBA will likely “be forced to cut rates to 0.75%, from 1.25% today”.
The Australian Council of Trade Unions blamed six years of near-record low wage growth for the result, with the assistant secretary, Liam O’Brien, warning the “wages crisis … is now slowing the entire economy”.
The December GDP figures showed the economy grew by just 2.3% in 2018 – the slowest in trend terms since March 2015 – and the December quarter saw growth of just 0.3% in trend terms, which was the lowest quarterly growth since March 2003.
