The Australian economy has recorded its weakest annual growth in a decade, official data released yesterday showed, expanding just 1.4 percent in the year to June.
The Australian Bureau of Statistics reported that the economy grew 0.5 percent between April and June, compared with the previous quarter, a small increase driven by mining exports and government spending.
“The external sector drove GDP growth this quarter, while growth in the domestic economy remains steady,” bureau chief economist Bruce Hockman said.
Australia has avoided recession for almost 28 years, but yesterday’s figures would fuel concerns about the economic outlook, with growth falling to its lowest levels since the global financial crisis in 2009.
No other Organisation for Economic Co-operation and Development nation has enjoyed such a prolonged uninterrupted period of economic growth, in part thanks to a mining boom in the 2000s on the back of strong demand for resources from China.
AMP Capital chief economist Shane Oliver said the risk of a recession “cannot be ignored,” with conditions in some pockets of the economy already feeling “recession-like.”
“With consumer spending still struggling to lift noticeably, falling residential construction, moderate business investment growth, the private sector side of the economy will likely remain weak,” he said.
The Reserve Bank of Australia (RBA) on Tuesday kept the main interest rate at a record low of 1 percent owing to subdued consumer spending and a slump in the housing market.
Analysts believe the bank could further cut rates in the coming months to help boost the economy.
“It is reasonable to expect that an extended period of low interest rates will be required,” RBA Governor Philip Lowe said.
However, Australian Prime Minister Scott Morrison was upbeat about the weak data, telling local radio yesterday that he was confident that recent tax cuts would stimulate the economy this quarter.
“That happened in the September quarter and the figures we’re talking about today were for last year,” he said. “So you can’t govern by rear-vision mirror. You have to look forward.”
Australian Treasurer Josh Frydenberg also downplayed the numbers, saying the economy had shown “remarkable resilience” amid global economic headwinds brought on by trade tensions between the US and China.
“Despite the challenges that the Australian economy is encountering — very significant challenges, both domestically and internationally, the trade tensions [along] with flood, with drought — we have still performed relatively well,” he told reporters in Canberra.
“I want to emphasize that Germany, the United Kingdom, Sweden, Singapore and others experienced negative growth in the June quarter, whereas the Australian economy continues to grow,” Frydenberg said.
He also said that Australia’s current account balance this week returned to surplus for the first time since 1975, posting a A$5.9 billion (US$4 billion) surplus on the back of a spike in iron ore prices.
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