According to Australian Bureau of Statistics (ABS), Australian gross domestic product (GDP) rose 0.2% in Q3 2023 and by 2.1% since Q3 2022.
Commenting on the release, Katherine Keenan, ABS head of national accounts, said: “This was the eighth straight rise in quarterly GDP, but growth has slowed over 2023. Government spending and capital investment were the main drivers of GDP growth this quarter.”
Government spending rose in September
Government final consumption expenditure rose 1.1% Q3 after a 0.6% increase in Q2. The growth in government expenditure was driven by social benefits to households, including the Energy Bill Relief Fund rebates, and extra payments for childcare, aged-care and pharmaceutical products. Defence also contributed to growth with increased expenditure related to international training exercises held in Australia in Q3.
Gross fixed capital formation rose 1.1%
The increase in gross fixed capital formation was driven by public corporations, with their investments rising 8.9%; primarily in transport, communication and utilities projects. Private engineering construction also rose due to increased mining industry investment.
Increased inventories reflected falling exports
Change in inventories contributed 0.4 percentage points towards Q3’s overall growth, following a detraction of 1.2 percentage points in Q2. Mining inventories rose A$2.4 billion, reflecting the larger fall in exports than in production volumes. Export prices for coal and LNG fell as global supplies increased. This resulted in falling mining profits (-6.5%) and drove the 2.6% fall in the terms-of-trade over Q3.
Trade in services detracted from growth
Imports of services rose 8.4%, outpacing the 1.9% growth in services exports. Imports of travel services rose 19.5% as more Australians travelled overseas; while exports of travel services (+4.4%) continued to recover post COVID international border restrictions. Q3 saw education exports rise as the number of international students hit an all-time high.
Household spending flat
Household spending was flat in Q3, as government benefits and rebates reduced household spending on essential services. Vehicle purchases went up in Q3 as supply constraints eased.
Compensation of employees rose 2.6%
The increase in compensation of employees was the largest quarterly rise since Q3 2022. Increases in the superannuation guarantee rate, the minimum wage and continued tightness in the labour market all contributed to the rise in compensation of employees in Q3.
Household saving ratio at lowest level since 2007
Household saving-to-income-ratio fell for the eighth straight quarter to 1.1%, its lowest level since Q4 2007.
“The removal of the Low and Middle Income Tax Offset in FY 2022-23 meant many households had a higher income tax bill this quarter, which contributed to the fall in the household saving ratio,” Keenan noted. “Increased interest paid on home loans and inflationary pressure were also likely factors behind the fall in the household-savings ratio.”