Australia’s Economy Slows Down As Labor’s Policies Effect Kicks In, Another Cash Rate Hike Possible
Australia’s economy grew at the weakest pace in 1-1/2 years last quarter as high prices and rising interest rates sapped consumer spending, while emerging signs pointed to further softness ahead amid high energy prices, elevated borrowing costs, and a slowdown in global growth.
Economists see these results as the first effects of new fiscal and economic policies introduced by the Labor Government after the government assumed office last May, since 12 months is traditionally a period when these changes can be fully observed. Remarkably, highly elevated energy prices affecting domestic manufacturing and transport became leading drivers of increasing costs of goods and services.
Data from the Australian Bureau of Statistics on Wednesday showed real gross domestic product (GDP) rose 0.2 percent in the first quarter, easing from 0.5 percent in the previous quarter and under forecasts of 0.3 percent.
Annual growth came in at 2.3 percent, also missing forecasts for 2.4 percent expansion.
The report contained initial signs that domestic price pressures are easing and evidence that households are saving less to meet high costs of livings and rising mortgage rates.
Household consumption rose only a meager 0.2 percent in the March quarter, contributing 0.1 percentage points to GDP, mostly from spending on essential goods and services.
Cash Rate Hike Possible, Markets Concluded
Today’s results caused markets to price in a 60 percent chance of another cash rate hike in July.