GDP growth unchanged

Australian economic growth remained to 2.1% p.a. in the September quarter 2023.

GDP growth is projected to slow to in 2024. The forecasts ranged from 2.0% to 1.4%.

Among other official forecasters, the IMF and OECD projections for Australian economic growth in 2024 are the lowest at 1.4%.

This projection is well below Australia’s long-term growth rate and will be the slowest year ahead since the recession of the early 1990s.

Inflation slowed in December

Consumer price inflation in Australia has slowed to 4.1% p.a. in the December quarter 2023. The quarterly rise of 0.6% is also the lowest for two years.

These numbers are well below the most recent RBA estimates for 2023 (4.5%). 

Housings, alcohol and tobacco, insurance and financial services, and food and non-alcoholic drinks led the December quarter rise.

However, the Producer Price Index – a measure of industrial goods inflation – increased in December, rising to 4.1% p.a.

Recovering working age population

Australia’s working age population continues to recover as a result of resumed migration.

The pandemic had a significant impact on the workforce. By the end of 2021, the working age population was 339,000 people below trend forecast.

But since border reopening, strong net overseas migration has seen the gap had reduced to only 23,000 persons by the middle of 2023.

As migration returns Australia’s working age population to its pre-pandemic trend level, this will alleviate labour market pressures.

New job creation declines

New job creation has become insufficient to absorb new labour market entrants.

Australia fell 24,000 new jobs in January (trend data). This is the lowest monthly rate in trend new jobs since the pandemic era.   

Currently, around 31,500 new jobs per month are needed to absorb new labour market entrants. This target has not been met for the last six months.

If this trend of slowing job creation continues in coming months, tightness in Australian labour markets will soon begin to ease.

Retail fall points to consumer weakness

According to ABS data, retail turnover in Australia decreased 2.7% in December 2023.

The significant decline in December retail revenue was attributable to a reduction in discretionary spending.

Per capita retail turnover was $1591 in December. Following a flat 2023, this decline saw per capita spending fall to its lowest level since April 2022.

Cost-of-living pressures and stagnant levels of discretionary spending are the principal factor behind declining retail sales.

Productivity goes backward last year

Australia has the dubious distinction of productivity going backwards in 2022-23.

Labour productivity fell by 2.9% last financial year - the first recorded fall since modern productivity statistics have been kept.  

Multifactor productivity - which measures output relative to the inputs of both capital and labour - also showed a 0.5% decline.

While productivity statistics are quite volatile year to year, this unprecedented decline in is a serious cause for concern.