Australia’s economy clinging to life through Government spending spree as growth nears slowest pace in decades

Australia’s economy is clinging to life through a government spending spree, as growth nears the slowest pace in decades and consumers close their wallets.

The weak pulse — just 0.8 per cent growth for the year to September — will pile on the pressure in Canberra as a Federal election looms, with the economy top of mind for voters.

Shadow Treasurer Angus Taylor seized on the data and declared the “numbers are a nightmare”.

“(The Government) think the answer to every problem is to throw money at it,” he said.

“But the result of that is persistent inflation (and) an absolute collapse in Australians’ standard of living.”

Yet Treasurer Jim Chalmers said families would have more in their wallets after tax cuts, wage growth, and slowing inflation helped push disposable income slightly higher.

“Australians would be much worse off and growth in our economy would be even weaker without our responsible and balanced approach to the Budget and without our cost-of-living support,” he said.

“Don’t forget over the last 18 months around three-quarters of (developed) economies have had a negative quarter of growth — at least one . . . the Australian economy has continued to grow each quarter.”

However, the slice of the pie for each person — GDP per capita — went backwards by 1.5 per cent through the year, according to the Australian Bureau of Statistics.

It has fallen for seven consecutive quarters as the cost of living smashes households and elevated interest rates add to the squeeze.

Even a blitz of power rebates and the Federal Government’s stage 3 tax cuts did not lure consumers into spending more — choosing instead to put their cash into the bank or pay off mortgages.

But as businesses and families tread water, government spending has surged.

Public investment rocketed more than 6 per cent in three months, driven by roads, defence and renewables.

It pours fuel on the fire of ongoing debate over whether political cash splashes are keeping the economy afloat or pulling activity away from the private sector.

Government spending — both State and Federal — has jobs booming but is likely also firing up inflation.

“The September quarter National Accounts clearly reveal that the public sector is underwriting the Australian economy,” EY chief economist Cherelle Murphy said.

“Never before have governments pumped so much into the economy via rebates, tax cuts, infrastructure, health and disability support, and defence.”

The level of spending would not deliver stability or sustainable long run growth, Ms Murphy warned.

Commonwealth Bank economist Gareth Aird said “the economy remains two‑speed”.

“Economic growth in the private sector has been non‑existent over the past two quarters,” he said.

“It is only public spending that has kept GDP growth positive over that period.

“This is an unusual situation.”

HSBC’s Paul Bloxham said the Reserve Bank would hold interest rates at the board meeting next week while Moody’s Analytics economist Harry Murphy Cruise said the first cut was still “a while off”.