GDP update: spending dips and saving soars as we stash rather than spend our tax cuts
- Written by Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University
Australians saved rather than spent most of the budget tax cuts, almost doubling the proportion of household income saved, leaving spending languishing.
The September quarter national accounts show that in the first three months of the financial year real household spending grew by just 0.1%, the least since the global financial crisis.
Over the year to September, inflation-adjusted spending grew by a mere 1.2%, also the least since the financial crisis. Australia’s population grew by 1.6% in that time, meaning the volume of goods and services bought per person went backwards.
Quarterly growth in household spending
Australian National AccountsSeparate figures released by the Federal Chamber of Automotive Industries on Wednesday show November new car sales were down 9.8% on November 2018.
By the end of November the Tax Office had issued more than 8.8. million tax refunds totalling A$25 billion, 30% more than a year before.
Instead of being largely spent, they were mostly saved, pushing up the household saving ratio from 2.7% to 4.8%, its highest point in more than two years.
Household saving ratio
Australian National AccountsTreasurer Josh Frydenberg put the best face on the result, saying whether they had been spent or saved, the cuts had put households in a stronger position.
The government’s goal has always been to put more money into the pockets of the Australian people, and it’s their choice as to whether they spend or save that money
Separately calculated retail figures show that in the three months to September the volume of goods and services bought fell 0.1%.
The disposable income households had available to spend grew an outsized 2.5%, driven by what the Bureau of Statistics said were the budget tax cuts.
Growth at GFC lows
The Australian economy grew just 0.4% in the three months to September, down from 0.6% in the June quarter, and 0.5% in the March quarter.
Over the year to September it grew 1.7%, well short of the budget forecasts, which in year average terms were 2.25% for 2018-19 and 2.75% for 2019-20.
Real GDP growth
Authors: Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University