Australian economy crawls back into growth mode thanks to data centre boom and household spending uptick | Australian economy
Increased investment in data centers to fuel the boom in artificial intelligence technology and increased household spending on basic needs such as electricity and rent supported economic growth in the three months to September.
National accounts figures showed real GDP rose 2.1% in the year, accelerating from 2% in June.
Despite positive signs that the private sector is starting to drive economic activity following strong government support, the quarterly growth rate remained at a disappointing 0.4%, well below the forecast rate of 0.7%.
After accounting for population growth, there was no increase in real GDP per capita this quarter, with an increase of just 0.4% in the year to September; This underlines the ongoing weak improvements in living standards.
Still, CBA’s Australian economics officer, Belinda Allen, said the national accounts showed how far the economy had come.
“Just a year ago (annual) growth was anemic at just 0.8%,” Allen said.
“Fast forward a year and with strong income growth providing better sentiment, households are spending again, businesses are investing, housing is being built and the public sector is putting a floor under growth.”
However, this welcome rise means that the economy is now able to meet its growth capacity without increasing inflation; This is a significant risk that will be taken into account at next Monday’s meeting of the Central Bank’s monetary policy board.
Ahead of the release of GDP figures, RBA governor Michele Bullock said it was unclear how much further economic activity could recover without increasing price pressures.
In senate estimates after inflation jumped to 3.8% by October (well above the 2-3 percent target range), Bullock said the panel would seek to “determine the extent to which this (the recent rise in inflation) is temporary or signals to us that there are more permanent pressures on the economy.”
Analysts and investors have largely ruled out further rate cuts and are now opening up the possibility that a rate hike could be the next move.
The key positive development in the latest national accounts was the boom in business investment, which rose 2.9% in the three months, which the ABS attributed to “major data center investment across NSW and Victoria”.
This was the fastest quarterly growth in private investment in four and a half years and contributed half a percentage point to overall economic growth in the quarter.
Analysts also noted an increase in productivity growth, although annual growth of 0.8% remained relatively weak and was a major challenge for the country’s growth prospects.
With home construction also contributing to this quarter, Jim Chalmers emphasized in his statement that the economy reached the fastest annual growth rate in the last two years.
“The best way to improve living standards and continue to achieve greater growth in the future is to make our economy more productive and resilient and our budget more sustainable, and that is our focus,” the Treasurer said.
The ABS said that in the three months to September, households were forced to spend more on their electricity bills as electricity rebates were lifted and on other essentials such as rent, food and healthcare – the latter “due to the long and severe flu season”.
Spending on basic needs rose 1% in the latest quarter, compared with a 0.6% increase in the previous quarter, while discretionary spending fell 0.2% after rising 1.5% in the previous quarter.
A more cautious consumer was also reflected in the increase in the household savings rate from 6% to 6.4% in the September quarter.
