The Australian Bureau of Statistics has released a larger than expected fall in GDP, putting the economy into negative growth at -0.5%.
- GDP at the lowest rate since 2008 at the height of the Global Financial Crisis.
- The biggest single culprit to the fall in growth was reduced government capital expenditure.
- Government capital spending, which includes infrastructure spending detracted all of the 0.5% fall in GDP.
- Private capital expenditure and weak overseas trade was offset by growth in household expenditure.
“We’re now halfway to what would be our first recession in 25 years,” Senior Economist at The Australia Institute, Matt Grudnoff said.
“The clear need for more public investment matches the advice of the RBA, which identified the opportunity, with record low interest rates, to take on more debt to stimulate growth.
“The drop in government investment this quarter was 10%, and that’s put a big dampener on the economy as a whole.
“Spending cuts are contracting the economy, when the opposite is needed at this stage of the economic cycle.
“Projects which are ‘shovel-ready’, such as the backlog of much needed urban infrastructure, would provide more immediate stimulus than the proposal to subsidise a coal mine in Queensland, which would be many years from commencement,” Grudnoff said.