Australia’s economy grew by just 0.2 per cent in the three months to June, landing broadly in line with expectations and taking the annual rate to 1.5 per cent.

Outside of Covid, it is the slowest rate of annual economic growth in more than 30 years and the sixth consecutive quarter in which per-person gross domestic product has fallen.

Australian Bureau of Statistics head of national accounts Katherine Keenan said economic growth had slowed over the past financial year.

“Excluding the Covid-19 pandemic period, annual financial year economic growth was the lowest since 1991-92 – the year that included the gradual recovery from the 1991 recession,” Keenan said on Wednesday.

In the first three months of the year, the ABS recorded a 0.2 per cent rise.

Treasurer Jim Chalmers blamed the lacklustre data on global uncertainty and plunging consumer spending.

“Today’s national accounts for the June quarter show that our economy is barely growing,” he said.

“This is the weakest growth since 2020. This is the inevitable consequence of global economic uncertainty, persistent but moderating inflation and higher interest rates.

“What we’re seeing here is weakness in the household part of the economy and private investment being offset by the contribution coming from exports and public final demand.

“The main story in these figures is consumption. Consumption went backwards and discretionary spending fell substantially.”

The National Accounts confirm the economy barely grew last quarter, reflecting global uncertainty, higher rates & persistent inflation.

It shows the pressures people are under and justifies our plan to fight inflation without smashing the economy & help people doing it tough.

— Jim Chalmers MP (@JEChalmers) September 4, 2024

Chalmers said the data vindicated the approach of the federal government’s last budget.

“It frankly torpedoes a lot of the free advice that we got at budget time to cut harder and harsher. That would have been a recipe for a much weaker economy. We know that from the data we have before you now,” he said.

But opposition treasury spokesman Angus Taylor said the Albanese government had put Australia “on a path to ruin, not recovery”.

“This looks, feels, and smells like a recession. Labor has failed to manage inflation and has failed to manage the economy,” he said.

“This is the consequence of a government that has spent its term fighting everything but inflation.

“Labor inherited an economy with low unemployment, strong growth, and recovering government finances – they have wasted it.”

Battling inflation comes at the expense of a weaker economy, with higher interest rates designed to encourage more saving and less spending, lowering demand for goods and services and therefore prices.

Australia’s real gross domestic product (GDP) rose 0.2% in the second quarter, in-line with market forecasts. Annual growth dropped to 1.0% in the June quarter, from 1.3% the previous quarter, the slowest pace since late 1991 outside of the Covid-19 pandemic. #ausecon #auspol https://t.co/Tg4DILRFqd pic.twitter.com/PDULhbpWNx

— CommSec (@CommSec) September 4, 2024

The Reserve Bank of Australia was bracing for another weak set of national accounts data and the economists believed a soft result was unlikely to sway the outlook on interest rates.

The central bank maintains underlying price pressures are still strong and interest rate cuts were looking unlikely until next year.

Moody’s Analytics economist Harry Murphy Cruise said there were early signs that saving was winning the “tug of war” with spending.

“Household deposits jumped more than 2 per cent in July from June as households banked the cost-of-living supports. Even better, the Melbourne Institute’s monthly inflation gauge showed a solid easing of inflation through August,” he said.

“If that trend continues – and it is a big if – the RBA might be able to ease up a little earlier than expected.”

But Murphy Cruise said the central bank wouldn’t be able to take its foot off the economic brakes until it was comfortable inflation is back under control.

“To that end, new cost-of-living relief, including energy rebates and tax cuts, are a double-edged sword,” he said.

“While they help to ease pressure on households today, they also risk adding a bunch of spending into the economy. If that happens, price pressures could linger, stretching out inflation’s tail and pushing back the prospect of rate cuts.”

-with AAP