"Australia's economy is clearly in a prolonged slow patch, and while that is bad news for sustainable improvements in real incomes and living standards, it is the deliberate outcome of increasing interest rates to control inflation," Innes Willox, Chief Executive of the national employer association Ai Group said.
"The economy ticked up 0.2 percent in the second quarter and by 1.5% in 2023-24 relative to the 2022-23 year. This is the slowest rate of growth, excluding the Covid pandemic, since 1991-92.
"Businesses across the economy are certainly feeling real pain with business investment down for the second consecutive quarter.
"This recent softness was reinforced in the Ai Group Australian Industry Index® for August, released earlier today, which fell 2.9 points to –23.5 points.
"Australians are also feeling real pain with household spending down in the quarter after two quarters of growth, which shows they are reeling from cost of living pressures, 13 interest rate rises and wage rates that are still lagging behind recent levels of inflation.
"The RBA last month cited 'persistent' inflation and that returning it to the 2-3 per cent target band was its highest priority and that it would do anything that was necessary to achieve it – reinforcing that they don't see a rate cut for at least six months.
"Monetary policy is now deliberately sacrificing economic growth to suppress inflation - that is the territory we are in.
"To reduce and shorten the pain being felt across the economy, it is vital that governments contain their spending and wage growth is moderated to help keep the lid on inflation.
"Hopefully, the feeble growth in the 2023-24 year restrained by current interest rate settings, is the low point in the effort to rein in inflation without tipping the economy into recession.
"A soft landing is the best we can hope for – a relatively gentle squeeze on activity that avoids overshooting the target and causing a large increase in unemployment. That path is still viable but our economy remains perilously close to falling into contraction," Mr Willox said.
