Interest rate cut hopes rise and Australian dollar slumps after GDP expands by a weak 0.3%

about 22 hours ago

Australia’s economy grew at a weaker-than-expected pace in the September quarter despite extra government spending, and slow pace may make early interest rate cuts more likely.The Australian dollar slumped.Gross domestic product (GDP) expanded 0.3% in the July-September months, the fastest in a year and the 12th quarter in a row of growth, the Australian Bureau of Statistics said on Wednesday.That pace compared with the 0.

5% rate expected by economists and the 0,2% growth in the June quarter,GDP was 0,8% larger than for the September quarter a year earlier, the weakest since the end of 2020,Economists had expected annual growth to come in at 1.

1%, or similar to the 1% rate the ABS had stated for the June quarter,Excluding the swelling population, though, GDP as measured on a per capita basis continued to retreat,It eased 0,3%, sinking for a record seventh straight quarter,The RBA’s latest forecasts had GDP expanding at an annual pace of 1.

5% by the end of 2024 and today’s numbers suggest that estimate will have to be revised lower.While the central bank will want to be sure underlying inflation is headed to a 2 to 3% range before it starts lowering the cash rate, it will have taken some comfort from households’ behaviour in the September quarter.Sign up for Guardian Australia’s breaking news emailTheir savings rate ticked up from 2.4% in the June quarter to 3.2% for the quarter just ended.

Nominal spending rose by 0.6% even as households’ disposable income rose 1.5%, implying that people were pocketing most of the stage-three tax cuts and real wage increases.Income taxes paid dropped 3.8%.

The treasurer, Jim Chalmers, said the growth in real incomes was “the most encouraging aspect of the data” and that overall activity would have fallen without government intervention.“We’d rather be part of a soft landing in our economy than [having] to clean up after a hard one,” Chalmers said.However, his opposition counterpart, Angus Taylor, said the government had “lost control of its spending”, with living standards falling the most among OECD nations.“Productivity has fallen off a cliff.It has collapsed 6% since the [May 2022] election,” Taylor said.

Output per hour fell for a second consecutive quarter and was 0.8% lower than for the September quarter of 2023, the ABS said.Governments have helped the economy avoid an overall contraction, even as the Reserve Bank lifted interest rates at the fastest clip in three decades.Public demand contributed 0.7 percentage points to quarterly GDP growth, the ABS said on Tuesday.

Still, those outlays prevented the unemployment rate in 2024 rising much above 4% so far, a figure close to the lowest in half a century.Employment in seasonally adjusted terms rose by 156,600 in the September quarter alone.More recent data indicate the economy is gathering steam.Retail turnover in October rose 3.4% before inflation, the most in 17 months, while building approvals were the most in 25 months.

A services industry survey found sentiment is now at its highest in 30 months, S&P Global reported on Wednesday.Prior to today’s GDP figures, investors saw little chance the RBA would cut its cash rate from the present 4.35% level at its board meeting next week.The dollar dropped against its US counterpart as investors shifted their bets on when the RBA may start cutting rates.By mid-afternoon (AEDT), it was down to 64.

2 US cents from about 64.85 US cents just prior to the data release.The slide of about 1% was similar against other currencies, including the Japanese yen.Traders have now fully priced in an RBA cash rate cut to 4.1% by the bank’s 1 April meeting compared with a 60% chance yesterday, according to Bloomberg.

“The quarterly growth in domestic prices was the lowest observed since March 2021,” the ABS’s head of national accounts, Katherine Keenan, said,“The growth this quarter reflected softening goods prices in the economy alongside more resilient services prices reflecting high demand for labour and costs of essential services such as rent, education and health,”Public investment jumped 6,3% in the September quarter – rising for the first quarter in a year to a record total – driven higher by more spending on defence equipment and outlays for roads and renewable energy, the ABS said,“Social benefits paid to households increased this quarter as households received energy cost relief rebates, including the Energy Bill Relief Fund”, Keenan said.

“At the commonwealth level growth in social benefits to households was lower, including NDIS and aged care, compared to recent quarters.”Pat Bustamante, a Westpac senior economist said annual growth was the slowest since the early 1990s recession.Average non-farm earnings an hour grew 1.3% in six-month annualised terms, down from a 2.3% a year pace in the June quarter and well below the pre-pandemic average of 1.

8%, Bustamante said,The head of macroeconomic forecasting for Oxford Economics Australia, Sean Langcake, said GDP growth would probably pick up slowly in coming quarters,“[The] fundamentals for an improvement in consumption growth are favourable,” he said,“But this improvement will be unspectacular, with the economy set to endure below trend growth in the near term while capacity constraints continue to bite,”

technologySee all

Why Silicon Valley panicked over Australia’s under-16 social media ban

Hello, and welcome to TechScape. Happy belated Thanksgiving to my American readers, and I hope everyone enjoys a good holiday party this weekend. I’m excited to bake Grittibänz for the Feast of St Nicholas. This week in tech: Australia incites a panic, Bluesky poses the question of custom feeds, and the online things that brought me joy on holiday.On Thursday, Australia passed a law banning children under 16 from social networks

1 day ago

Meta says it has taken down about 20 covert influence operations in 2024

Meta has intervened to take down about 20 covert influence operations around the world this year, it has emerged – though the tech firm said fears of AI-fuelled fakery warping elections had not materialised in 2024.Nick Clegg, the president of global affairs at the company that runs Facebook, Instagram and WhatsApp, said Russia was still the No 1 source of the adversarial online activity but said in a briefing it was “striking” how little AI was used to try to trick voters in the busiest ever year for elections around the world.The former British deputy prime minister revealed that Meta, which has more than 3 billion users, had to take down just over 500,000 requests to generate images on its own AI tools of Donald Trump and Kamala Harris, JD Vance and Joe Biden in the month leading up to US election day.But the firm’s security experts had to tackle a new operation using fake accounts to manipulate public debate for a strategic goal at the rate of more than one every three weeks. The “coordinated inauthentic behaviour” incidents included a Russian network using dozens of Facebook accounts and fictitious news websites to target people in Georgia, Armenia and Azerbaijan

1 day ago

‘It feels like a startup energy’: Google’s UK boss on the advent of AI

While the tech giant wrestles with an US antitrust case, its managing director in London is pushing hard on the commercial possibilities of artificial intelligenceGoogle’s central London office cost as much as a tech unicorn and the company’s UK boss, Debbie Weinstein, says it pulses with a similar spirit.“It feels like a startup energy,” she says.However, we are meeting on a morning when Google has been threatened with a reckoning reserved for members of the corporate establishment, not tech ingenues: a breakup.Hours earlier, the US Department of Justice had asked a federal judge to order the sale of Google’s Chrome browser, along with a host of other actions including making its search index – a database of all the webpages it has crawled – available to competitors. It follows a ruling by the same judge in August that the $2tn company has built an illegal monopoly in the search market

1 day ago

The ChatGPT secret: is that text message from your friend, your lover – or a robot?

People are turning to chatbots to solve all their life problems, and they like its answers. But are they on a very slippery slope?When Tim first tried ChatGPT, he wasn’t very impressed. He had a play around, but ended up cancelling his subscription. Then he started having marriage troubles. Seeking to alleviate his soul-searching and sleepless nights, he took up journalling and found it beneficial

1 day ago

‘Russia can turn the lights off’: how the UK is preparing for cyberwar

The Swedish government checklist for surviving a war would not have looked out of place decades ago: bottled water; sleeping bags; extra batteries; enough cash for a week; and non-perishable food such as rice and cereal.Without being mentioned in name, Russia once more lurks in the background as it did during the cold war. But the nature of the threat it poses in the pamphlet, called “In case of crisis or war”, has changed.Alongside raising the possibility of “an armed attack against Sweden”, the guide also mentions “cyber-attacks” and “disinformation campaigns”.As well as coping with the threat of nuclear conflict or an armed border incursion, Europe must now contend with a very 21st-century foe: cyberwarfare

2 days ago

UK underestimates threat of cyber-attacks from hostile states and gangs, says security chief

The UK is underestimating the severity of the online threat it faces from hostile states and criminal gangs, the country’s cybersecurity chief will warn.Richard Horne, the head of GCHQ’s National Cyber Security Centre, will cite a trebling of “severe” incidents amid Russian “aggression and recklessness” and China’s “highly sophisticated” digital operations.In his first major speech as the agency’s chief, Horne will say on Tuesday that hostile activity in UK cyberspace has increased in “frequency, sophistication and intensity” from enemies who want to cause maximum disruption and destruction.In a speech at the NCSC’s London HQ, Horne, who took on the role in October, will point to “the aggression and recklessness of cyber-activity we see coming from Russia” and how “China remains a highly sophisticated cyber-actor, with increasing ambition to project its influence beyond its borders”.“And yet, despite all this, we believe the severity of the risk facing the UK is being widely underestimated,” he will say

2 days ago

trendingSee all

;