Quarterly gross domestic products (GDP) in the three months to March fell to a megre 0.1% as reduced spending from households offset government and business outgoings. 

This is the slowest pace of growth since December 2020 when GDP plunged to -0.4%.

Compared with market consensus, the March quarter result is a touch below the 0.2% expected growth, similar to the previous quarter, but is broadly in line with predictions by big 4 banks' economists

Looking at through the year figures, the economy further stalled, growing 1.1% in seasonally adjusted chain volume measures and 3.5% in current prices. 

Market watchers had predicted annual GDP growth to come in at 1.2%.

Both quarterly and annual results are weaker than the RBA expected, which, based on its recent Statement on Monetary Policy, are estimated to be around 0.3% (q/q) and 1.3% (y/y).

The weak results reinforce the view that the RBA will keep the cash rate on hold at its upcoming mid-year policy meeting, with the economy unlikely to survive another interest rate hike. 

Five quarters of negative GDP per capita  

If you've been feeling the pinch on a personal level, the per-capita figures, and the household savings ratio, might explain why.

Beneath the headline figures, GDP per capita slumped a further 0.4%, with five consecutive quarters of negative growth continuing the per-capita recession. 

This surpassed the country’s record in 1983 when GDP per capita growth was in the negative territory for four consecutive quarters. 

It's the first time five quarters of negative growth has been recorded since records began in 1973.

According to ABS head of national accounts Katherine Keenan, subdued domestic demand slowed the nation’s economic growth. 

The domestic demand, which accounts for consumer, business, and government spending, grew 0.2% over the quarter.

Throughout the year, per-capita growth contracted by 1.3%.

GDP per capita measures the growth of a nation by its population. Although a growing population contributes to the overall increase in GDP, a large figure shrinks the average if economic growth doesn’t keep pace with the population expansion. 

Meanwhile, real unit labour costs slightly moderated to 3.4% as wages growth subdued and labour productivity growth picked up. 

“A pick-up in labour productivity growth was expected, in part because the capital-to-labour ratio was forecast to recover in response to strong business investment,” the RBA earlier said. 

Hours worked posted a 0.1% lift in the quarter, after falling by around 1.0% over the second half of last year. 

March quarter wage price index rose to 0.8%, bringing the annual pay growth to 4.1%; both figures slipped from 1.0% (quarterly) and 4.2% (annual) growth in the prior quarter. 

With a slight easing in salary growth amid the acceleration of quarterly inflation to 1%, households had less money left to save.

Aussie households save less

The household savings ratio fell to 0.9% in three months to March, plummeting from the revised 1.6% over the previous quarter. 

More spending by households out of the same income has seen the household saving rate revised lower. 

Prior to ABS’ revision, the household saving ratio in the December quarter was 3.2%. 

“Household income received grew at its lowest rate since December 2021, reflecting the relatively small rises in compensation of employees and investment income received this quarter,” Ms Keenan said.

Household consumption grew 0.4% in the March quarter. 

“Compared to last quarter, the growth in income tax payable did not detract as much from total income payable by households, resulting in a lower household saving ratio.” 

This may change in the third quarter once the Stage 3 tax cuts take effect on 1 July, although they return less than a quarter of the bracket creep over the past couple of years.

The latest Westpac-Melbourne Institute Consumer Sentiment Index found that the majority of Aussies intend to save their tax relief, with 30% planning to keep all of it in savings and 50% expecting to save at least half.

“Bottom line is, household spending has been more resilient than previously estimated, but now households have smaller buffers to support spending going forward,” Westpac senior economist Matthew Hassan said.

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