Today's National Accounts confirm the Australian economy barely grew in the June quarter.
Really soft growth reflects the impacts of global economic uncertainty, higher interest rates and persistent but moderating inflation.
This combination of challenges is weighing heavily on households and the data shows Australians are continuing to limit their consumption and curb spending.
The main takeout is that consumption fell by 0.2 per cent in the quarter, with people pulling back on discretionary spending to make room for essentials. At the same time, the household savings ratio hit its lowest annual rate in 17 years.
This data clearly shows the pressures people are under and demonstrates why the approach we took in the Budget was the right one in response to the difficult conditions we've been confronting.
It justifies our economic plan which is all about fighting inflation without smashing an economy which is already weak, and helping people doing it tough.
The economy grew 0.2 per cent in the June quarter, to be 1.0 per cent higher through the year.
Annual growth in 2023-24 was 1.5 per cent, which is the weakest since 2019-20 when the Morrison Government was in office.
We expected quarterly growth to be weak and that's what we've seen, with flat private demand and household consumption going backwards.
That's why we've been striking a fine balance between a primary focus on fighting inflation, providing cost of living relief and managing the challenges of higher interest rates and global uncertainty.
Without the 0.2 percentage point contribution from new public final demand in the June quarter, there wouldn't have been any growth in the economy at all.
Growth in public demand over the year has largely been driven by unavoidable spending on services that Australians rely on everyday like Medicare, the Pharmaceutical Benefits Scheme and the NDIS, as well as our responsible cost of living relief.
Even with this necessary support, new public demand growth has been much lower since the election. Annualised average public final demand has grown by 3.3 per cent since the election, compared to 4.7 per cent under our predecessors.
Around the world, higher interest rates and persistent price pressures are hurting people and weakening growth.
We've seen two‑thirds of OECD nations' economies going backwards in at least one quarter over the past year, while Australia has avoided a negative quarter to date.
In these circumstances, any growth is welcome but it's clear that people are still under pressure.
Higher mortgage interest costs rising as a result of higher interest rates means that households are spending less.
Consumption fell by 0.2 per cent in the quarter. It grew just 0.5 per cent through the year to June which is about how much it usually grows in a single quarter.
People are pulling back on spending to make room for essentials, with discretionary spending falling by 1.1 per cent in the quarter and essential spending up only 0.5 per cent.
Households continue to save only a small proportion of their income to make room for those essentials, with the saving rate at 0.6 per cent in the quarter. Across 2023-24, the household saving ratio was 0.9 per cent - the lowest annual rate in 17 years.
In the face of persistent cost of living pressures, the Albanese Labor Government is helping people to earn more and keep more of what they earn.
We saw incomes continue to grow in the quarter, with compensation of employees up 0.9 per cent - and 6.3 per cent higher through the year. Across the Government's first two years in office, incomes rose at their fastest two‑year rate in 16 years.
With continued wage growth and moderating inflation, real household disposable income rose for the second consecutive quarter and is up 0.4 per cent through the year. The Government's tax cuts for every taxpayer also began flowing from 1 July and will help people keep more of what they earn and ease the cost of living.
Higher interest rates are weighing on dwelling investment, which rose 0.1 per cent in the quarter, to be 3.0 per cent lower through the year.
New business investment rose by 0.1 per cent in the quarter, to be 2.2 per cent higher through the year. While business investment has not been immune from global uncertainty and higher interest rates, it has been growing strongly since we came to office and hit its highest level in over a decade last financial year.
Productivity declined by 0.8 per cent in the quarter but is up 0.5 per cent in the year to June. We know that quarterly movements can be volatile, and it will take some time to turn around our productivity performance.
Net exports contributed 0.2 percentage points to growth in the quarter. Exports grew 0.5 per cent, while imports fell 0.2 per cent after recording strong growth in the previous quarter.
The contribution in net exports was offset by a reduction in inventories, which detracted 0.3 percentage points from growth, as businesses sold goods they imported in the previous quarter.
These National Accounts give us more confidence in the economic judgements we've made but we're not complacent about the soft landing we're working towards.
We know there's more to do because people are still doing it tough, but we're making substantial progress when it comes to the budget and the economy.
We've overseen the creation of almost a million new jobs since the election - mostly full time and mostly for women. The gender pay gap is the smallest it's ever been.
Inflation is half its peak and much lower than the 6.1 per cent we inherited. We've got the Budget in much better nick and have turned two huge Liberal deficits into two substantial Labor surpluses.
Since we came to Government, Australia has recorded faster employment growth than any major advanced economy.
Today's data vindicates the approach we took in the Budget. It confirms our responsible economic management is right for the combination of challenges we confront together in the economy.
