In 2023 all that kept Australia’s economy increasing was population growth. On a per capita basis, Australia’s economy shrank 0.3% and was down 1% in the same period in 2022. And even that weak result was made less worse due to trade providing an increase to GDP. But even there the news was not good. Net exports contributed to GDP growth in the December quarter, not because our exports increased, but because our imports fell. Australians were buying less from overseas and businesses likewise were not bringing in items to sell.

The figures reveal that the impact of the Reserve Bank raising the cash rate by 425 basis points is causing a sharp slowing of the economy. As yet we have not teetered into an actual recession, but with three consecutive quarters of falling per capita GDP, there is no sense of any strength or demand that the RBA is so desperate to hinder.

When the RBA raised the cash rate in November, I argued it was the wrong decision. When the September quarter GDP figures showed how weak Australia’s economy was, David Richardson argued it showed the RBA was wrong to raise rates, these latest figures just confirm that call.

Since the RBA began raising rates the amount of interest households have had to pay on home loans has risen 162%.

That is a massive crunch on the ability of Australians to buy other things, and it is little wonder that household spending has slowed dramatically and spending on “non-essential” items has fallen.

We should remember that the Reserve Bank decided in November to increase interest rates one more time, just when this economy was struggling, just as households were cutting back on buying discretionary items and just as unemployment was rising.

The Reserve Bank assured us it was aware of the risks of slowing the economy too harshly. Right now it should be very worried indeed.