Quarterly GDP in the three months through September was just 0.2% greater than the prior quarter, which came in below forecasts.

CommBank economists had pencilled in 0.5%; ANZ, 0.3%; Westpac, 0.5%; and NAB, 0.5%.

Market consensus was 0.4% growth, while the RBA had forecast 0.4% in its latest Statement of Monetary Policy. 

Beyond the headline figures, GDP per capita slumped a further 0.5%, with three quarters of negative growth continuing the per-capita recession. 

According to ABS head of national accounts Katherine Keenan, government spending and capital investment drove the meagre GDP growth.

That said GDP per hour worked - a common measure of productivity - turned around, up 0.9% over the quarter; this was against a backdrop of real unit labour costs growing 1.2%.

This implies wage growth is outpacing productivity, but the gulf was not as pronounced as the quarter prior (-1.6% vs +2.7%).

Household savings at a 16 year low

The household savings ratio posted a 1.1% result over the quarter, which is the lowest level since December 2007.

As eagle-eyed readers will note, the household savings ratio was negative for a large part of the mid-2000s, but CBA's head of Australian economics Gareth Aird explained why it's different this time.

"This is not the same story of pre‑GFC euphoria that saw the savings rate hover around zero," Mr Aird said.

"The data is reflecting a stretched household sector that at the individual level is cutting back on spending due to the effects of elevated inflation, rising interest payments and a big lift in tax payable."

In addition to the cost of living and increased mortgage payments, the ABS' Ms Keenan said households have dipped into their savings to pay for surprise tax bills.

"The removal of the Low and Middle Income Tax Offset in the 2022-23 financial year meant many households had a higher income tax bill this quarter, which has contributed to the fall in the household saving ratio,” she said.

“Increased interest paid on home loans and inflationary pressure on households were also likely factors behind the fall in the household savings ratio.”

The government's nominal take from income tax has risen substantially in recent years as wages growth has pushed income earners into higher tax brackets, called bracket creep.

Brackets are not indexed to inflation unlike other advanced economies such as Germany, France, Sweden, Norway, and Finland.

Income taxes paid by Australian households increased from $65.1 billion in quarter-three of 2021, to $90.9bn in quarter-three 2023.

Partly as a result of bracket creep and inflation, real household disposable income contracted 1.7% over the quarter and is down 8.3% from the peak in the third quarter of 2021.

"Against this backdrop it is no wonder that consumer sentiment has been at levels consistent with a major negative economic shock for over a year," Mr Aird said.

"The savings rate in the September quarter was comfortably below its five year pre‑pandemic average of 6%."

To summarise, as per Westpac's Andrew Hanlan: "Overall, the update is a bleak one for households with incomes under intense pressure [and] diminished scope for support from savings".

Image by Tim Mossholder on Unsplash