Chalmers hints at 'warning sign' ahead of GDP figures

The Treasurer has foreshadowed a weak end to the year for the national economy, saying warning signs were present in the retail sector.

National growth figures for the December quarter will be released on Wednesday, with some predicting GDP to have gone backwards for the last three months of 2023.

Economists expect a subdued read for the December quarter, especially after business inventories data from the Australian Bureau of Statistics on Monday fell by more than anticipated.

Businesses were found to be running down their inventories over the December quarter, recording a 1.7 per cent fall that was much softer than the flat result economists were predicting.

Jim Chalmers said the quarterly results were expected to be weak in line with global trends.

“The December quarter was quite weak because people were running down their inventories rather than producing or acquiring more stock, that is often a bit of a warning sign about the economic conditions at the time,” he told ABC TV on Tuesday.

“There is enough around to trouble us about how the economy finished 2023.”

However, there will be more economic indicators that feed into the growth result released on Tuesday, the balance of payments and government statistics, that economists use to firm up their forecasts.

Despite the forecasts for the quarter, Dr Chalmers said Australia was in a better position than similar economies, which had gone into recession during the same time period.

“The December quarter in the Australian economy and indeed the global economy was quite weak. Remember, that was the quarter where we saw Japan and the UK both go into recession,” he said.

“We had an interest rate hike right in the middle of that December quarter, we had those persistent cost of living pressures that people are confronting in our communities and around our country.”

It comes as small business sales growth as tracked by Xero via its accounting software record averaged 5.1 per cent annually for the December quarter, down from 6.8 per cent in the September quarter.

Weakness was most pronounced in interest-rate sensitive industries, such as retail (sales lifted 1.2 per cent annually) and agriculture (sales fell four per cent annually).

Xero economist Louis Southall said multiple interest rate hikes and high inflation was weighing on household budgets.

“And we can see a shift in the December data, particularly in the retail sector,” she said.

The economist said conditions would likely remain challenging as interest rates stayed high and inflation remained above the central bank’s target.