The Morrison government is banking on tax refunds and low interest rates to bolster the economy, as the latest figures show Australia’s economy has slowed to its most sluggish since 2009.
The economy expanded by just 0.5 per cent in the June quarter, and annual growth slumped to 1.4 per cent – equal to the worst growth recorded in the aftermath of the global financial crisis in the September quarter of 2009.
The quarterly increase was in line with market consensus, which was for annual growth to soften from three months ago.
Government final consumption expenditure contributed 0.5 percentage points to GDP growth in the quarter, while household final consumption expenditure contributed 0.2 percentage points.
The grim figure represents Australia’s weakest economic growth in a decade.
But the government has shrugged off the numbers, with Prime Minister Scott Morrison denying any danger of the economy slipping into recession.
“I don’t see us going in that territory at all,” he told Melbourne radio 3AW on Wednesday.
Mr Morrison agreed the economy had “softened”, but was keener to play up Tuesday’s data that showed Australia had recorded its first current account trade surplus in 44 years.
“I was pretty pleased with the current account numbers that came out yesterday,” he said.
“That’s the first current account surplus since 1975; Skyhooks led the charts back then.”
Mr Morrison also rejected suggestions the tax cuts had failed to stimulate the economy.
“That’s a ridiculous comment,” he told interviewer Neil Mitchell.
“The figures that are coming out today are for the June quarter. The tax cuts were passed in the September quarter. Of course I am [confident they’ll work].”
Later, Treasurer Josh Frydenberg said the data did not take into account the full flow-through of the federal government’s income tax cuts and the Reserve Bank’s 50 basis points worth of interest rate cuts.
“It’s a reminder of the remarkable resilience of the Australian economy and a repudiation of all those who have sought to talk it down,” he said.
“The fundamentals of the Australian economy are strong.”
But the economy still faced challenges in terms of productivity and household consumption, which was softer than the government would like, he said.
“We are having a discussion with key stakeholders about other ways we can boost investment, and those decisions will be decisions at budget time,” Mr Frydenberg said.
Mr Morrison has written to the states about bringing forward infrastructure spending.
The current account surplus revealed on Tuesday – on the back of strong export volumes of coal, iron ore and liquid natural gas – contributed about 0.6 per cent to GDP growth.
Labor seized on the weak growth figure as proof of a government that has no plan for the economy.
“This is the inevitable consequence of a government which has a political strategy but not an economic plan to turn things around,” shadow treasurer Jim Chalmers told the ABC.
The Australian Taxation Office said it had received more than 7.8 million individual 2019 tax return lodgements – a 15 per cent increase on the previous year.
“We have issued over 5.5 million individual 2019 income tax refunds with a total value of over $14.2 billion,” an ATO spokeswoman said.
Retail spending fell by an unexpected 0.1 per cent in July, missing forecasts of a 0.2 per cent rise.
The biggest fall was in spending on cafes, restaurants and takeaway services.
The Reserve Bank, which kept the cash rate on hold at 1.0 per cent on Tuesday, flagged it would ease rates further “if needed to support sustainable growth”.
The outlook for the global economy remained reasonable, the RBA said, although the risks were tilted to the downside.
“A further gradual lift in wages growth would be a welcome development,” RBA Governor Philip Lowe said.