The latest national accounts figures, unveiled on Wednesday, have dealt a significant setback to the Albanese Labor government as it readies itself for a federal election that must be announced by next May. The data underscores a concerning economic scenario, with government spending emerging as the sole factor preventing the Australian economy from slipping into recession. Annual GDP growth dropped from 1 percent in the June quarter to just 0.8 percent for the year ending September, with a quarterly increase of only 0.3 percent—well below the forecasted 0.5 percent. The annual growth figure of 0.8 percent remains markedly below the 30-year average of 3 percent recorded between 1990 and 2020. Excluding the unique impact of the COVID-19 pandemic, this represents the weakest growth since the 1990‒91 recession.
Private sector growth during the quarter was anemic at 0.2 percent. Without the 2.4 percent rise in government spending, which contributed 0.6 percentage points to the GDP, the overall economic performance would have been even bleaker.
Another troubling indicator is the continuing decline in per capita GDP, which fell by 0.3 percent in the September quarter—marking the seventh consecutive quarter of negative growth. As per calculations by the Sydney Morning Herald, this equates to a $1,660 reduction in national income per person over the past year, a figure that fails to capture the additional financial strain from rising mortgage costs.
Since May 2022, the Reserve Bank of Australia (RBA) has initiated 13 interest rate hikes, increasing the base rate from 0.1 percent to 4.35 percent, resulting in a significant reduction in disposable income for homeowners. This has stifled household consumption, which remained flat in the September quarter and has trended downward over the past six months. Household spending now lags behind pre-pandemic levels, with nearly half of the decline in real disposable income attributed to higher mortgage payments, according to economic columnist Greg Jericho. Another critical economic driver, the construction sector, has also suffered significantly. Non-residential construction fell by 2.7 percent in the quarter, while residential buildings contracted by 0.5 percent over the year after adjusting for inflation.
Treasurer Jim Chalmers acknowledged the widespread economic challenges but sought to reassure the public by highlighting the government’s ongoing efforts. Despite these assertions, the RBA’s policies, fully supported by the government, remain focused on controlling inflation—a strategy that critics argue disproportionately burdens the working class.
Profit-taking in sectors like food and energy, as corporations capitalized on pandemic-induced supply chain disruptions to raise prices and profit margins, has largely driven inflationary pressures. Nonetheless, the RBA has directed its measures toward suppressing wage growth to curb inflation, aiming to lift unemployment from 4.1 percent to 4.5 percent, effectively adding 680,000 individuals to the jobless pool.
While some commentators, including former Labor minister Craig Emerson, have criticized the RBA’s strategy as counterproductive, describing it as a deliberate effort to increase unemployment without tangible benefits, others argue these policies reflect deeper systemic challenges. Global trends connect Australia’s economic woes, not isolating them. The situation is further compounded by slowing growth in China, its largest trading partner, stagnant economic activity in Europe, and escalating trade tensions driven by U.S. protectionist policies. Domestically, Deloitte Access Economics has flagged a potential $50 billion budget deficit blowout, prompting calls for fiscal restraint.
Finance capital and corporate leaders have also voiced their concerns, urging the government to curtail public expenditure and implement structural reforms. Business leaders, including Westfarmers CEO Rob Scott and BHP Australia President Geraldine Slattery, have advocated for tax cuts, deregulation, and increased labor market flexibility under the guise of improving productivity. Global consultancy firm McKinsey has labelled Australia’s stagnating productivity growth since 2016 as a “national emergency,” attributing it partially to the corporate tax rate, which is deemed uncompetitive internationally. As the government faces mounting pressure from the financial sector and business elites, it becomes increasingly evident that piecemeal policy adjustments will not address the underlying issues. Advocates for systemic change argue that the working class must mobilize for a transformative political program rooted in socialism to counter the entrenched influence of finance capital and secure equitable economic outcomes.
