National economy grew 0.8 per cent in year to September

Australia’s economy grew just 0.8 per cent in the year to September — stuck in low gear as Jim Chalmers and Michele Bullock fought over which pedal to push.

And the slice of the pie for each person has shrunk again, with GDP per capita going backwards by 1.5 per cent through the year. It has fallen for seven consecutive quarters as the cost of living bites Australians hard.

The pressure is weighing on households. Their spending was flat for the three months to the end of September despite the rollout of the Federal Government’s Stage 3 tax cuts in that period.

The bleak numbers released on Wednesday by the Australian Bureau of Statistics were below the expectations of most analysts, including UBS and Commonwealth Bank.

But the quarterly pace has lifted very marginally — running at 0.3 per cent in September, up from 0.2 per cent in June.

Government spending on infrastructure, ongoing operations, and through cost of living subsidies added to activity, while businesses and households were weak.

“The September quarter National Accounts clearly reveal that the public sector is underwriting the Australian economy,” EY chief economist Cherelle Murphy said.

“Never before have governments pumped so much into the economy via rebates, tax cuts, infrastructure, health and disability support, and defence.”

She warned the level of spending would not deliver stability or sustainable long run growth.

Treasurer Jim Chalmers and his State counterparts have been pressing the economy’s accelerator at the same time the Reserve Bank wants to hit the brakes to fight inflation.

It sparked a fight in early September when Dr Chalmers said elevated interest rates were smashing the economy.

On Wednesday, he said the economy’s growth was “positive but weak”.

“Our economy is growing but very slowly, weighed down by interest rates, cost of living pressures and global uncertainty,” he said.

“Australians would be much worse off and growth would be even weaker without our responsible approach to the Budget and our cost-of-living support.”

Shadow Treasurer Angus Taylor slammed the Government’s management ahead of a Federal Election due next year.

“We need a leader, we’re not getting it,” he said.

The latest data shows the full impact of government cash splashes — with public investment rocketing more than 6 per cent in three months, driven by roads, defence and renewables.

Debate has raged about the impact of that spending as the size of government increases.

Governments have propped up activity, and the publicly-funded care sector has created bountiful jobs.

Yet there have been consequences, as the booming public construction pipeline sucked workers and resources away from housing.

Australia’s engine is close to stalling, however, with growth near the slowest level in decades outside the pandemic.

“The Aussie economy remains in the slow lane as sky-high borrowing costs and structurally higher prices zap spending,” Moody’s Analytics economist Harry Murphy Cruise said.

He said the economy would stay “sluggish until interest rates come down”.

“Despite progress on inflation, that first cut still looks a little while off. Members of the Reserve Bank Board are a cautious bunch and will want to be certain inflation is under control before pulling the rate cut trigger,” he said.

Meanwhile, the nation’s export boom has been sliding, with the trade surplus falling to the lowest level since 2018.

That’s likely to weigh on revenue in government budgets.