Australian economic growth continues to fall short of what Treasurer Josh Frydenberg promised heading into this year’s federal election, as new figures showed only a tiny expansion in the September quarter.
The latest national accounts released on Wednesday showed the economy expanded by 1.7 per cent in the year to September compared to a previously reported 1.4 per cent as of June.
It backed Reserve Bank governor Philip Lowe’s view that Australia has reached a “gentle turning point”.
But it is still well short of the 2.75 per cent predicted for the financial year when Mr Frydenberg handed down his pre-election budget in April.
“The economy has continued to grow, however the rate of growth remains well below the long run average,” Australian Bureau of Statistics chief economist Bruce Hockman said.
The Treasurer said the government would update the forecasts in the mid-year budget, which is due before Christmas.
“But the story today is that despite the headwinds, domestic and international, we see the Australian economy continuing to grow,” Mr Frydenberg said.
However, growth in the September quarter was weaker than economists had expected at 0.4 per cent after an upwardly revised 0.6 per cent in the June quarter.
The central bank left the official cash rate at a record low 0.75 per cent at its monthly board meeting on Tuesday.
After the meeting, Dr Lowe said the economy appeared to have reached a “gentle turning point”, believing that growth will lift to about 3 per cent in 2021.
However, financial markets still believe there is a 50/50 chance the Reserve Bank will be forced to cut the cash rate to 0.50 per cent in February after the board’s summer recess.
Three interest cuts and personal income tax reductions this year have failed to give the economy a major boost.
“The reduction to tax payable did not translate to a rise in discretionary spending, which led to a visible impact to household saving,” Mr Hockman said.
With the household sector remaining subdued, the main contributions to growth in the quarter came from exports and government spending.
“Of course, we would like to see consumption to be higher, there is no doubt about that, but obviously people are getting more money in their pocket through the tax cuts,” the treasurer said.
The Australian Taxation Office said that as of December 2, it had issued over 8.8 million in individual income tax refunds for the 2018/19 financial years with a total value of $24.8 billion.