Yahoo Finance Australia is in a per-capita recession: What you need to know
Australia is in a per-capita recession. This is what that means.
Australia has avoided a recession in terms of economic growth but Aussies haven’t been in a worse position personally since 2009.
And that was proven by the recent GDP figures from the Australian Bureau of Statistics, which showed economic growth per capita fell 0.3 per cent for the second quarter in a row - meaning we are in a per-capita recession.
What you need to know
Australia’s economy grew 0.4 per cent in the June quarter
Per capita, Australia’s economy shrunk 0.3 per cent for the second quarter in a row
A recession is defined as two quarters of shrinking growth
Increased migration was the major driver for overall growth, but also the reason per-capita growth shrunk
The data shows that the Reserve Bank (RBA) is succeeding in tightening household budgets
🗣️ What they said
Co-founder of Macrobusiness and MB Super chief economist Leith van Onselen: “It is clear that the main driver of Australia’s GDP growth is the Albanese government’s unprecedented immigration program, which delivered a record net 502,000 visa holders (excluding tourists) into Australia in the year to July, with student visas accounting for 297,000 of these arrivals.
“Sadly, the economy is not growing quickly enough to absorb these arrivals, and everyone’s share of the economic pie and living standards are shrinking, alongside the shortage of rental homes and infrastructure.”
CommSec chief economist Craig James: “Household budgets are under pressure from inflation and rising interest rates. There are minimal signs at this stage that households in aggregate are drawing down on their savings buffers to fund further spending.”
BetaShares chief economist David Bassanese: “Higher interest rates, courtesy of the RBA, are certainly doing their part in slowing down the consumer, which is a big chunk (50 per cent) of the economy.”
🔢 The story in numbers
An Aussie with a $500,000 mortgage is spending an additional $1,134 per month compared to May last year
Someone with a $1 million mortgage is spending an additional $2,269 every month compared to May last year
The average Australian is spending $199.46 on groceries per shop
Some energy providers are charging $800 more than a year ago
Aussies with a large tank in the car are spending around $200 to fill up
Inflation is at 6 per cent annually
Average weekly earnings increased just 3.9 per cent annually to $1,838.10 in May 2023
🤔 Should I be worried?
Not necessarily. While it’s not nice that households have less of a share of wealth, and people are undoubtedly struggling right now, it doesn’t mean things are bound to get worse. In fact, Bassnese believes all of this data points to the fact the RBA is likely to be done raising interest rates and the next move will be a cut further down the line. This would take pressure off households, and hopefully get per-capita GDP back in the green.
“Provided overall economic growth remains subdued - which is heavily reliant on weak consumer spending - and inflation continues to trend lower, the RBA has likely finished raising interest rates this cycle – with rate cuts likely by mid-2024,” Bassanese said.
🗞️ For more about an Australian recession:
Follow Yahoo Finance on Facebook, LinkedIn, Instagram and Twitter, and subscribe to our free daily newsletter.
