Westpac with some unusually frank observations about Albo’s immigration-led economy.
The Australian economy almost came to a standstill in the September quarter, with output up a very weak 0.2%.
That was materially weaker than expected, Westpac 0.5% and market median 0.5%, range (0.1% to 1.0%).
Annual growth printed 2.1%, or -0.3% in per capita terms.
Quarterly growth momentum has progressively slowed, from a 0.6% average through 2022, to 0.5% for Q1 2023, to 0.4% for Q2 and now the 0.2% for Q3.
Rapidly rising population, which increased by 0.7%qtr, 2.4%yr, is underpinning domestic spending and economic growth.
The intense headwinds of high inflation, sharply higher interest and additional tax obligations are having a significant impact, leading to a sharp decline in real household disposable income.
Key surprise: Consumer spending was the key surprise and the key takeout from the September quarter accounts.
Consumer spending came in materially below expectations, stalling flat in the quarter against expectations of a subdued 0.5% gain.
The detail showed a much weaker picture on services which look to have contracted about 1%qtr on a combined basis. With retail components flat and vehicle operations down in the quarter, the offset came from a bit 13% surge in vehicle spend – which is likely to be a temporary lift as backlogged orders clear.
The income picture for households in the period was, in summary: nominal gross income rose by 1.8%, including wage incomes up by 2.5%; while nominal disposable income was almost flat, up only 0.1% (squeezed by rising interest payments and due to another unexpectedly big jump in income tax payments); and real disposable income collapsed, contracting -1.3%qtr, -4.3%yr.
The household saving ratio slumped to only 1.1% from 2.8%x, which is well below the recent average of around 6%, as households draw down the additional savings accumulated during the pandemic.
Overall, the update is a bleak one for households with incomes under intense pressure, diminished scope for support from savings and some temporary timing effects around vehicles likely to drop out of the spend profile.
Too right. Here is yours truly saying much the same on 2GB’s Treasury of Common Sense.
