Australia economy slows to a crawl in Ql as inflation persists

Australia's economy slowed to a crawl in the first quarter of 2024 as high borrowing costs and still-elevated inflation put the brakes on consumer spending, even as the prospect of relief on interest rates remains a distant one.

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Data from the Australian Bureau of Statistics on June 5 showed real gross domestic product (GDP) for January to March rose 0.1 per cent quarter on quarter, just under market forecasts of 0.2 per cent.

Annual growth dropped to 1.1 per cent, from 1.5 per cent the previous quarter and the slowest pace in three decades outside of the Covid-19 pandemic.

Growth in household spending, which accounts for half of GDP, was only a fraction firmer at 1.3 per cent. Most of that was on essential items such as electricity and healthcare, with discretionary spending almost flat for the year.

There was also grim news for future spending power, with the savings rate sinking to a historically low 0.9 per cent, after large downward revisions to past numbers.