“Shocking” near-zero growth a sign that rates are hurting the economy – Jericho

by Greg Jericho
Reserve Bank of Australia (RBA) governor Michele Bullock during Senate Estimates at Parliament House in Canberra, Wednesday, June 5, 2024.
AAP Image/Mick Tsikas

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High interest rates have dramatically slowed the economy, pushing many households to their limits, says Greg Jericho.

Treasurer Jim Chalmers said “any growth is welcome” at his recent press conference on Australia’s March quarter economic performance.

But the Treasurer was surely hoping to welcome a little more than the 0.1 per cent gross domestic product (GDP) growth we got.

“It’s really hard to sugar coat this,” said Australia Institute Chief Economist Greg Jericho.

“It’s a rounding error away from nothing.”

The story gets worse when you exclude population growth, with GDP per capita falling 0.4 per cent in the March quarter.

“That was the fifth quarter in a row that our economy has contracted on a per capita basis,” Jericho said.

“The last time that happened? Ah, it’s never happened before…”

Treasurer Chalmers described the weak growth as “the inevitable consequence of these rate rises which are in the system.”

Jericho agreed, saying the “overwhelming reason” for Australia’s slow growth is interest rate growth, which has “massively slowed” consumer spending.

“Our household disposable income has plummeted and we’re really doing it tough.”

But, speaking before the announcement, Reserve Bank Governor Michele Bullock said the RBA “won’t hesitate” to raise interest rates again if inflation doesn’t start to come down.

This won’t help the problem though, as households have already cut back and much of their spending has been dedicated to essential items, Jericho argued.

“Rate rises aren’t going to bring down your insurance bill, your rent, your electricity costs.”

“Please God, no more rate rises.”

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