Australia’s economy gets an updated report card on Wednesday, with the release of June quarter gross domestic product figures.
Here’s why it’s important and how to read what the numbers mean.
What’s GDP?
Formally known as the National Accounts, the Australian Bureau of Statistics releases figures for gross domestic product every three months: it is widely treated as a good proxy for the health of Australia’s economy.
As a swelling population tends to add to output, per-capita GDP figures can offer a finer gauge of how Australians are faring. With a population growing by more than 2% annually, GDP has shrunk five quarters in a row (starting with a 0.03% contraction in October-December 2022) to the March quarter, the worst stint in data going back to 1973. The June quarter will make it six.
What isn’t captured: the value of unpaid work and the black market, as well as depletion of assets from wear and tear– natural disasters (expect more of these on a hotter planet) can trigger make-good repairs such as rebuilding damaged roads or bridges, that merely look like economic activity.
(The loss of environmental assets to generate that economic activity is also not assessed.)
What do we know so far?
GDP figures are among the last ABS data releases for each period. Most of the components, from trade to government spending (both released on Tuesday) are already known, allowing economists to hone their estimates.
The economy has been in a funk for some time. March quarter GDP grew just 0.1% compared with the final three months of 2023, the ABS told us in June but that number could be revised lower or higher.
GDP for the March quarter was up 1.1% on a year earlier. That number may be revised, but at that level, growth pace was the slowest since the March quarter of 1991, the ABS said – excluding the Covid lockdown era.
The major banks predict the economy grew between 0.1% (ANZ) and 0.4% (CBA) for the quarter, with Westpac and NAB tipping 0.3%. On an annual basis, their economists say this will come in at 0.8% (ANZ), 1% (Westpac) and 1.1% (CBA, NAB).
What will it mean?
Whatever the outcome, expect political spin. A negative monthly GDP figure may prompt “recession” headlines , particularly if coupled with a revised sub-zero March quarter – overlooking the fact per-capita GDP will have been in retreat for a year and a half.
Government spending contributed 0.4 percentage points to the June quarter outcome, the ABS said on Tuesday. Governments, including the federal one, may well have kept the overall economy growing. That may irk some pundits but justify the treasurer, Jim Chalmers’ insistence that now is not the time for public austerity.
The Reserve Bank, meanwhile, has modelled a 0.9% annual GDP figure for the June quarter. Its governor, Michele Bullock, and the RBA board may read a weaker result as making an interest rate cut this year more likely, while a stronger figure would likely push any reduction into next year (and keep another hike as an option).
What to look for next
Bullock will speak on Thursday, and the board next meets on 23-24 September. Both occasions should clarify the central bank’s stance.
Recall, though, that the June quarter – and its 15 April midpoint – is already receding in the rear view mirror.
A lot of data has already landed for July, another month of strong employment growth with almost 60,000 new jobs, even if the jobless rate edged up. July inflation figures were generally better too, with a gauge excluding volatile items at its lowest level since January 2022.
The start of the stage-three tax cuts will return about $23bn to taxpayers over the year from July; energy and other rebates will also help consumers.
September quarter GDP numbers will land on 4 December.
A lot can change – the 5 November US presidential election could spark turmoil, or a sharper than expected China slowdown could dent commodity prices further – but it’s possible the June quarter numbers mark the nadir in Australia’s GDP performance.
