Yesterday’s Q4 national accounts release from the Australian Bureau of Statistics (ABS) was a shocker for Aussie households.
GDP in per capita terms – i.e. after adjusting for population growth (immigration) – was dead flat in the December quarter, which follows the September quarter’s anemic 0.1% growth.
Worse, domestic final demand (DFD), which gauges domestic activity by stripping away the impact of net exports, was dead flat in the December quarter and actually went backwards by 0.5% in per capita terms.
This followed flat (0%) per capita DFD growth in the September quarter.
So basically, the per capita economy is already teetering on recession, with the aggregate economy saved only by strong population growth via mass immigration.
The driver of the economic slowdown is household consumption, which grew by only 0.3% in the December quarter, and actually fell by 0.2% in per capita terms.
Household consumption is the main driver of the Australian economy and where it goes the economy typically follows:
This slowing in household consumption came despite a sharp fall in the household savings rate to just 4.5% in the December quarter, down from 7.1% in the September quarter:
In fact, the last time the household savings rate was this low was September 2017.
With inflation running rampant, the average compensation of employees has fallen sharply in real terms, falling to 2012 levels:
Basically, households are dipping into their savings to maintain consumption in the face of falling real wages, inflation, and increasing interest repayments following the RBA’s aggressive interest rate hikes.
Looking ahead, it is clear that household consumption and economic growth will fall further in 2023 as the RBA continues to tighten.
This, in turn, will result in a consumer-led per capita recession for Aussie households.
