Australia's economy is finally slowing - but by how much?

Australia's economy is finally slowing - but by how much?

Australia's economy is finally slowing - but by how much?

Australia has dipped into a per capita recession with new data yesterday showing that while the economy expanded over the December quarter, it was not enough to outpace the rate of population growth.

"The economy lost considerable momentum in 2018, slowing from around a 4.0 per cent annualised pace in the first half of the year to around a 1.0 per cent pace in the second", Westpac Bank Chief Economist Bill Evans said.

Australian retail turnover rose 0.1 per cent in January 2019, seasonally adjusted, according to the latest Australian Bureau of Statistics (ABS) Retail Trade figures.

GDP per capita contracted by 0.2 percent for the fourth quarter, after shrinking 0.1 percent in the previous three months.

The figures showed annual growth last year at 2.3 per cent, but with growth slowing considerably in the second half of the year as consumer spending weakened and storm clouds gathered in the long-booming housing market. Evidence of the wealth effect from the fall in home prices is playing out with the savings ratio rising to 2.5% from 2.3% in the prior quarter. "A pick-up in growth in household income is nonetheless expected to support household spending over the next year".

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The uncertainties surrounding household consumption are also likely to worsen given the sluggish wage growth and continued decline in property prices.

Underlying business investment (which takes into account asset transfers between the private and public sector) rose by 0.7% and contributed 0.1 percentage points to growth.

Inflation pressures and wages are still low.

The central bank on Tuesday kept interest rates at a record low of 1.50 percent as it waits to see if a strong labour market - with the jobless rate at 5.0 percent - feeds into higher wages.

With the GDP numbers providing a backward looking confirmation of the weak growth in the economy at the end of 2018, it is important to look at more recent data releases but these have been mixed.

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