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(Australian Associated Press)
The economy expanded by an underwhelming 0.4 per cent in the September quarter as mining sector continued to fire but consumers apparently pocketed tax offsets instead of spending them.
The quarterly increase undershot market consensus of 0.5 per cent growth as domestic final demand remained subdued – contributing just 0.2 percentage points – while annual growth was a below trend 1.7 per cent despite improving on the previous quarter’s 10-year low.
BIS Oxford economist Dr Sarah Hunter said the chronic weakness in household spending was made very clear in Wednesday’s figures, with private consumption increasing by just 0.1 per cent.
Growth in household gross disposable income outpaced subdued household final consumption leading to a sharp 4.8 per cent rise in the household saving ratio.
“(There is) no sign yet that the increase in tax offsets and rate cuts are boosting household spending,” Dr Hunter said.
“Instead, households have chosen to save the additional disposable income from the higher tax offsets and lower mortgage interest payments.”
The Aussie dollar dipped from 68.49 US cents immediately after the data’s 1130 AEDT release, before plunging to 68.31 cents at 1210 AEDT following an escalation in US-Chinese trade relations.
Wednesday’s data comes after the Reserve Bank opted to keep the cash rate on hold at a record low 0.75 per cent despite weak consumer spending and stagnant wage growth continuing to keep a lid on business investment, jobs and inflation.
Economists suggested prior to the release of the data that a consensus growth result would mirror the RBA’s sentiment the economy had reached a “gentle turning point” after growth bottomed out during the previous quarter.
The economy had expanded by 0.5 per cent in the three months to June as annual growth slowed to a fresh post-GFC low of 1.4 per cent.
Dr Hunter added that household income growth would only soften as the impact of the higher tax offsets dropped out of the calculation, with annual growth likely to remain at a subdued two per cent for the next year.
“(With) consumers still cautious about the outlook, we’re unlikely to see a significant pick-up in consumer spending,” Dr Hunter said.
The nation’s mining sector help prop up the September quarter result as it grew by 0.7 per cent over the quarter on strong for demand iron ore, while coal production increased following maintenance in the previous quarter.
The mining industry grew 7.4 per cent through the year.
Government spending was up 0.9 per cent and was the main contributor to growth in domestic final demand, reflecting ongoing delivery of services in disability, health and aged care.
Net exports contributed 0.2 percentage points to growth this quarter.
China on Wednesday announced its opposition of a US House of Representatives’ bill that supports a tougher US response to what the bill describes as China’s crackdown on ethnic minorities in Xinjiang.