Australia’s economy grew at a weaker than expected pace in the September quarter, improving the chance of early RBA interest rates cuts.
The Australian Bureau of Statistics (ABS) today revealed that the country's gross domestic product (GDP) expanded by just 0.3% from June to September, falling short of the forecasted 0.5% growth. That pace compared with the 0.2% growth in the June quarter.
Annual GDP growth slowed to 0.8% in the year to September, down from 1% in the previous quarter. Economists had expected a 1.1% annual increase.
This marks the weakest growth outside the COVID-19 pandemic period since the early 1990s recession, even as government spending reached a record level.
Meanwhile, GDP per capita, an indicator of living standards, fell by 0.3%, marking the seventh consecutive quarterly decline as population growth outpaced economic expansion.
Although inflation has sharply decreased since the Reserve Bank of Australia's (RBA) rate hikes began in May 2022, the economy has shown signs of strain.
The disappointing result may prompt RBA Governor Michele Bullock to bring forward interest rate cuts.
The RBA had earlier projected GDP growth to reach 1.5% by the end of 2024 but that now seems unlikely without a strong December quarter. Additionally, GDP per hours worked fell by 0.8%, a concerning signal for labour productivity.
Marcel Theiliant of Capital Economics said, "The weakness in GDP growth adds to the case for looser monetary policy.
"We're sticking to our view that the Bank will start a short easing cycle in the second quarter of next year.”.
Prior to today’s GDP figures, investors had seen little chance of a rate cut from the present 4.35% level at the RBA board meeting next week. They also saw less than a one-in-five chance of 25 basis-point cut at the central bank’s following meeting in February, while a reduction by May was viewed as all but a certainty.