Cassandra Winzar on the recent GDP figures

Brendan Arrow: Australia’s economy has grown in the final three months of last year, according to the Australian Bureau of Statistics’ National accounts. The Australian economy grew by 0.2 per cent in the fourth quarter of 2023 and 1.5 per cent over the year. Cassandra Winzar is the Chief Economist of CEDA, the Committee for Economic Development of Australia. She says it's a little bit lower than expected but not by much.

Cassandra Winzar: It’s roughly in line with the expectations of most economists so no real surprises in there. What we're seeing is that particularly consumer spending was very weak during that quarter, and particularly on discretionary items. It reflects what a lot of people would feel about the economy at the moment that it's pretty soft. We're not in a recession and we're not looking at a particular risk of recession in the short term, but growth is pretty soft and consumers are certainly starting to cut back.

Brendan Arrow: These figures were part of an expected pre-Christmas spending boom. I remember we had Black Friday and Cyber Monday sales did they help prop up that little bit of growth that we did have?

Cassandra Winzar: Look it may have helped a little bit. These are all seasonally adjusted figures, so they do try and take into account spending patterns like that where we see that surge in spending pre-Christmas. But actually, what we saw is that overall that spending on discretionary items was really very soft. People kept spending on essentials, so electricity, rent, food, that sort of thing, but where we saw people really cutting back was in things like cafes and restaurants, clothing and footwear, so we're really starting to see consumers cut back on things that are really not absolutely essential.

Brendan Arrow: I guess that’s tying in with what the Reserve Bank of Australia would be hoping that the heat's coming out of the market having increased interest rates so much and households having to decide, really and truly what they're spending their money on.

Cassandra Winzar: Exactly this is what we would expect. So there's this trade-off between getting inflation under control and the impact that that has on economic growth, and this is exactly how things play out. It does take a while and I think that's what we've seen in these GDP numbers. It's been some time now that the RBA started to increase interest rates and it’s been a little while since they put through another rate cut, but what we’ve seen is the cumulative impacts of that and it takes quite a few months, really up to 18 months for that to come through and we’re really seeing that at the moment. We're seeing that trade-off between getting inflation under control, which is absolutely crucial, but we are seeing that trade-off in growth and particularly in consumer spending.

Brendan Arrow: Speaking of the RBA, they next meet on the 19th of March, what do you think they'll make of this data?

Cassandra Winzar: I don't think this data will change the RBA’s views on the state of the economy or speed up any changes to interest rates. It’s pretty much in line with expectations, which have been for soft growth for this year and everything is playing out in that way. If we saw particularly low growth today maybe there'd be a bit of a desire for interest rate cuts on the horizon, but we haven't seen anywhere near that yet. It’s pretty likely that there will be no change at the upcoming board meeting and really no change over the next few months unless we see something really big change either in these GDP figures or in the unemployment figures.