Economy ‘On Life Support’ as Infation and High Interest Rates Take Their Toll

Australia’s economy continues to show signs of strain, with per capita GDP shrinking for the sixth consecutive quarter in June, according to the latest data from the Australian Bureau of Statistics (ABS). The economy experienced a 0.4% drop in per capita GDP, mirroring the March quarter decline and confrming ongoing concerns about a per capita recession. While the broader economy grew by 0.2% during the June quarter, this marks the slowest annual growth rate since 1991-92, excluding the pandemic years.

Stephen Smith, a partner at Deloitte Access Economics, noted that the fgures are unsurprising to struggling households. “The economy remains on life support as infationary pressures continue to bite,” he said, echoing sentiments that the current economic environment is far from stable.

Weak Household Demand and Infationary Pressures

The ABS highlighted that subdued household demand was a key factor in the sluggish growth, with household consumption subtracting 0.1 percentage points from GDP this quarter. The ongoing impact of infation and high interest rates has caused a signifcant reduction in discretionary spending, a trend likely to persist as households continue to tighten their budgets.

Smith suggested that while infation remains a priority, there may be a shift in economic focus. “The economy has likely hit the bottom of the trough, and now the conversation needs to move beyond just infation.”

Interest Rates: Have They Peaked? With per capita economic growth contracting for six consecutive quarters, many economists believe that interest rates may have reached their peak. PropTrack economist Anne Flaherty said the data raises concerns. “We haven’t seen this level of persistent negative per capita growth in decades,” she noted. Smith was more defnitive in his view, stating that the ABS data indicates interest rates have peaked. All eyes are now on the Reserve Bank of Australia (RBA), with Flaherty suggesting that the central bank may hold rates steady in its next meeting. “While the expectation is that rates won’t move, it will be fascinating to see what the RBA highlights, given the broader economic challenges.”

Households Feeling the Squeeze Essential spending, including rent and other housing-related costs, rose by 0.5% in the June quarter, underscoring the pressure on household budgets. Flaherty pointed out that most household income is being funnelled into higher rent and mortgage payments, leaving little room for savings or discretionary spending. “For frsthome buyers, the outlook remains incredibly tough,” she said, adding that saving for a deposit is taking much longer due to these fnancial constraints.

Homeowners aren’t faring much better, with many fnding they have little left after mortgage repayments and general living expenses. mismanaging infation and the economy.

Flaherty warned that more households might continue to struggle as economic pressures mount.

Government Response: Data

Highlights Pressure on Households

Treasurer Jim Chalmers acknowledged that the small uptick in GDP growth was driven by persistent but moderating infation, as well as ongoing global uncertainties. “This data clearly shows the pressure households are under,” Chalmers said. He added that the government’s economic plan is focused on fghting infation without causing further damage to an already weak economy.

However, shadow treasurer Angus Taylor was quick to criticize, accusing Chalmers of

Taylor argued that the treasurer’s focus on the RBA has detracted from addressing homegrown infation, further worsening the economic situation. “This looks, feels, and smells like a recession,” Taylor said, pointing to the rising cost of living and sluggish economic growth as failures of Labor’s economic policies.

Signs of Optimism

Amid Economic Woes

Despite the bleak data, Smith noted a few positive developments. The upcoming Stage 3 tax cuts are expected to increase real household income by around one percentage point in the coming year. Additionally, support payments, such as energy bill subsidies, will provide some relief to consumers, offering a potential boost to retail and wholesale industries. On the housing front, there was a modest 0.1% increase in dwelling investment, driven by a 2.5% rise in new house completions. This is a welcome sign for the construction sector, which has faced challenges related to labour shortages and rising building costs. Flaherty also struck a cautiously optimistic tone, noting that while the economic growth fgures are meagre, they are still positive thanks to strong population growth. “More people means more consumption and demand, which is helping to keep the economy afoat,” she said.

Conclusion Australia’s economy is navigating a challenging period, with infation, high interest rates, and shrinking per capita GDP weighing heavily on households. While there are some signs of optimism, such as tax cuts and increased household support, the broader economic outlook remains uncertain as the RBA and the government work to strike a balance between managing infation and supporting growth.

Spring Sellout: Essential Tips to Get the Best Price for Your Home

ROBERT HEYWARD

As Australia’s spring selling season begins, sellers must prepare to stand out in a competitive market. Spring is the busiest time for real estate, with a 12% rise in new home listings compared to last year, according to PropTrack. Here are essential tips to help sellers secure the best price for their property.

1. Presentation Matters

Presentation is crucial in attracting potential buyers. Sarah Hackett of Place Estate Agents in Brisbane stresses the importance of decluttering, freshening up fxtures, and updating spaces with greenery and paint. Professional styling is a great investment, optimizing your home’s layout and fow. Outdoor areas, such as verandas and gardens, should also be made inviting, as they are key selling points.

2. Set the Right Price

With home price growth slowing, aligning seller and buyer expectations is essential. Thomas McGlynn, CEO of BresicWhitney in Sydney, notes that while sellers may have high hopes for their sale price, buyers are increasingly price-sensitive. Finding the right price balance is key to attracting interest without scaring off potential buyers.

3. Know Your Market

Understanding the market dynamics is critical. Michelle Kerr of Duet Property Group in Perth advises sellers to complete necessary repairs before listing, as buyers are less inclined to take on properties requiring major renovations. Given the ongoing challenges in the building industry, a move-in-ready home is more appealing.

4. Focus on the Three P’s

Andrew McCann, CEO of Jellis Craig in Melbourne, highlights the importance of price, presentation, and process in a successful sale. Spring brings more listings, giving sellers additional options to buy and sell within the same market. Ensuring your property is well-priced, presented, and managed will help you navigate the competitive season. By focusing on presentation, setting a realistic price, and understanding the market, sellers can make the most of the spring selling season and secure the best price for their homes.