‘Restraint is in order’: Treasurer

Data from the Australian Bureau of Statistics (ABS) for the September quarter showed that the nation’s economy expanded by 0.6 per cent and by 5.9 per cent in the year to September.

Treasurer Jim Chalmers has described the annual growth rate as a “strong result”, although has cautioned that the domestic and global economy is facing many challenges.

“We’ve got some things going for us in the economy at the moment — low unemployment, good prices for our exports, the beginnings of some wages growth — and that’s all really important,” Mr Chalmers said.

“But a lot of the global uncertainty is ahead of us rather than behind us.”

The September quarter was the fourth consecutive quarter of economic growth, following a contraction in the September quarter 2021, which was impacted by the COVID-19 delta outbreak, according to the ABS.

The increase in Australia’s gross domestic product (GDP) was largely driven by household spending “once again”, Sean Crick, head of national accounts at the ABS, said. 

The data showed household spending rose 1.1 per cent for the quarter, weakening the household saving-to-income ratio for the fourth quarter as spending outpaced earnings.

“The household savings ratio continued to decline this quarter, moving towards pre-COVID-19 pandemic levels. Higher levels of spending and increases in interest payable on dwellings detracted from household saving compared to the June quarter,” Mr Crick said.

Dwelling investment also grew by 1.0 per cent in the quarter, signalling a strong pipeline of housing projects to be completed.

“Rising interest rates and falling property prices resulted in declining house sales and auction clearance rates,” the ABS data revealed.

Mr Chalmers said the data signalled an easing of disruptions in global supply chains, given the increase in goods imports in the quarter.

As Australians keep spending, the central bank pushes back delivering its eighth consecutive cash rate hike in December, taking the cash rate to 3.1 per cent.

“Australians are already under the pump and if you’ve got a mortgage — life got a bit harder,” Mr Chalmers said.

“But the impact on the economy … is felt down the track, and so they’ve got a difficult balance to try and strike.

“Unfortunately, the consequences for people with a mortgage are really tough.”

In fact, more than 1 million mortgage holders were estimated to be in ‘mortgage stress’ in the three months to October 2022, according to Australian research company Roy Morgan.

“I’m worried about people who took out a mortgage relatively recently when interest rates were incredibly low,” Mr Chalmer said.

“A lot of people are on fixed rate mortgages and when the fixed component of their loan comes off, obviously, it’ll come off into a much higher interest rate environment.”

But given the Reserve Bank does not meet in January, it will give some “reprieve” to borrowers and allow the central bank to assess impacts, Mr Chalmers said.

May budget can expect further tightening 

With the rising cost of living, particularly high energy prices, the Treasurer said the government is “working on a plan to try and take the edge off”.

He said talks with the states, the energy minister, regulators, and impacted industries are already underway to discuss how to lessen the impact of escalating fuel prices.

“We’ve got a big problem with energy prices. It’s feeding an even bigger problem with inflation in our economy, which is our biggest challenge right now,” Mr Chalmers said.

“Restraint is in order and that’s what we showed in October and what we will show in May.”

Looking ahead, the Reserve Bank of Australia (RBA) expects the economy to grow by just 1.4 per cent in 2023.

The government invites stakeholders to share their submission for the 2023–24 budget by Friday, 27 January 2023.

[Related: Mortgage stress highest since pre-pandemic]