SYDNEY — Australia’s economy grew by less than expected in the third quarter, even as consumer spending continued to rise despite a flurry of interest-rate rises by the country’s central bank.
The economy recorded gross domestic product growth of 0.6% for the quarter, and 5.9% over the year, the Australian Bureau of Statistics said Wednesday. The average economist forecast had been for GDP growth of 6.3% from the year-earlier period.
Quarterly growth moderated from 0.9% three months earlier as increased imports offset a rise in exports. Weaker demand for commodities including iron ore resulted in a 6.6% decline in Australia’s terms of trade, its largest fall since June 2009.
“Households continued to increase spending on domestic and international travel as Covid-19 travel restrictions continued to ease,” said Sean Crick, ABS head of national accounts. New vehicle sales were also up as supply-chain congestion eased, he added.
Household spending rose 1.1% in the third quarter, contributing 0.6 percentage point to GDP. Growth was driven by spending on travel-related categories, such as transport services, hotels, cafes and restaurants, the ABS said.
The household-savings-to-income ratio fell for the fourth consecutive quarter, to 6.9% from 8.3%, as the increase in household spending outpaced growth in household income, the ABS said.
Exports rose 11% as international students and tourists returned to Australia, although net trade detracted 0.2 percentage point from GDP amid factors including increased outbound tourism, the ABS said.
A potential area of concern for the Reserve Bank of Australia could be that employee compensation rose by the most since December 2006. It increased 3.2% over the quarter against the backdrop of a tight labor market and an increase in the minimum wage.
RBA Gov. Philip Lowe on Tuesday highlighted the importance of avoiding what he called a prices-wages spiral as the bank delivered a sixth consecutive rise in official interest rates. The RBA hiked the cash rate by 25 basis points to a nine-year high of 3.10% and warned of more to come as it tries to tackle inflation, which was running at an annual 8.3% at the end of September.
The RBA doesn’t meet again until February and economists are split on whether the bank will hike again or whether its hawkish commentary was an attempt to jawbone markets and consumers.
The central bank has raised the cash rate by 300 basis points since May, but the impact on consumer spending has been limited, partly because fixed-rate mortgages surged in popularity while interest rates were low.
Many of those fixed-term periods are due to expire in 2023, raising borrowing costs and, the RBA hopes, reducing the cash that households spend elsewhere.
The household-savings rate should rise by about 1.5 percentage points over coming quarters as declining property prices register with homeowners, said Marcel Thielant, an economist with Capital Economics.
“Given that the current downturn is set to become the deepest in Australia’s modern history, households may well tighten their belt more sharply,” Thielant said. He expects the economy to grow 1.0% in 2023.