The Australian economy has fallen to its slowest rate of growth in a decade, forcing the Morrison government to enact a plan to bring forward infrastructure spending to stimulate it out its slump.
The economy would have struggled to stay out of recession without historically high levels of immigration, with economic growth per person – gross domestic product per capita – negative over the past 12 months, the worst performance since the global financial crisis.
Overall, the economy grew by 0.5 per cent in the three months to June, a mild improvement from the 0.1 result recorded between September and December last year.
Treasurer Josh Frydenberg said Australia had continued to grow despite increasing international headwinds.
“The only people who are disappointed with today’s national accounts are [Labor’s] Anthony Albanese and Jim Chalmers,” he said on Wednesday.
Mr Frydenberg said “we are in a new world” with “low interest rates, relatively low unemployment and low inflation.”
“I want to emphasise that Germany, the United Kingdom, Sweden, Singapore and others experienced negative growth in the June quarter,” he said.
“The Australian economy has shown remarkable resilience, and these numbers are a repudiation of all those who have sought to talk down the economy.”
The Treasurer said Prime Minister Scott Morrison had written to state premiers about the possibility of bringing forward some infrastructure projects.
Among the states, NSW went nowhere in the three months to June, recording a 0 per cent state final demand growth rate. The figure, which measures the total value of goods and services sold, was only marginally higher in Victoria at 0.5 per cent. In both states, government expenditure offset falls in private and dwelling investment.
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Government spending drove the result, adding 0.5 percentage points, making up for negative figures for private capital and inventories. Household consumption continued to struggle on the back of historically low wage growth and high levels of debt, adding 0.2 per cent to GDP.
The mining sector was the strongest of all parts of the economy, accounting for about half of all growth. But those sectors directly exposed to consumers such as retail and construction all dipped through the quarter.
New car sales are down 10.1 per cent compared to August last year, with each segment of the market recording a downturn as consumers increasingly avoid expensive purchases.
The figures, released separately by the Federal Chamber of Automotive Industries on Wednesday, show passenger vehicles dropped by 16.7 per cent, SUV’s fell by 5.4 per cent and light commercial vehicles were down by 8.6 per cent.
“There is no doubt it is a very tough market at the moment,” said Federal Chamber of Automotive Industries chief executive Tony Weber.
“This environment stems from a slow start to the year, with tight financial lending, state and federal elections and a general lack of consumer confidence.”
In a sign consumers are saving less to make ends meet, the household saving ratio fell to its lowest level since December 2007.
The economy recorded a similar 1.4 per cent overall figure in the immediate aftermath of the global financial crisis.
Despite the fall, nominal GDP – which feeds directly into the budget – was above expectations with the surge in key commodities set to feed extra cash to the government bottom line.
Ahead of the figures, Prime Minister Scott Morrison said the government was expecting a soft result but the situation would get better through the rest of the year.
“We’ve got a calm and measured and disciplined approach for dealing with this into the future,” he said.
“The numbers today will be softer. That will come as no surprise to me but I think, as we go into the back half of the year, things will improve. The Australian economy, I believe, will continue to grow.”
Shadow treasurer Jim Chalmers said the government was in denial about the state of the economy.
“The government just wants to pretend that everything is hunky dory in the economy, that they’ve got everything right, they’ve got the policies right,” he said.
“But their approach so far, all that’s delivered is the slowest growth in at least 10 years, stagnant wages, record household debt, declining living standards, declining productivity, the list goes on and on and on.”