Softened Growth in December Quarter Sparks Concerns About Australia’s Economic Health

Pedestrians move past a woman sitting on the George Street sidewalk in Sydney, Australia, on Oct. 18, 2022. Lisa Maree Williams/Getty Images

The drop in economic growth in the December 2022 quarter has raised concerns about Australia’s economic outlook as the country continues to struggle with high inflation and interest rate hikes.

In the three months to December 2022, Australia’s GDP (gross domestic product) grew by 0.5 percent, taking the annual growth to 2.7 percent.

The figure was lower than the 0.7 percent increase recorded in the previous quarter and fell short of the 0.8 percent growth forecasted by many economists.

As the economy slowed down, the Business Council of Australia warned that the nation was more vulnerable than ever to global economic headwinds, citing a drop in productivity and business investments.

“Business investment equals jobs and opportunities, but today’s numbers show investment sliding backwards,” Business Council CEO Jennifer Westacott said.

“If we don’t act to lift productivity by driving investment, innovation and new industries, the hip pocket gains for Australians will be short-lived, and they'll continue to fall behind.”

The CEO then urged the federal government to address “serious structural barriers” that were hindering the private sector, including labour shortages and red tape.

Concerns About High Inflation

Meanwhile, the Australian Industry Group feared that the interest rate hiking cycle implemented by the central bank to combat inflation had started to take a toll on the economy.

“There is a clear risk that policy tightening will go too far. One sign of this risk is that were it not for the fall in imports, GDP would have shrunk in the December quarter,” Australian Industry Group CEO Innes Willox said.

Willox also called on governments, businesses and employees to exercise moderation in price setting and wage claims to prevent a wage-price spiral from emerging.

“The risk of a wage-price spiral emerging is real. The consequences of such a spiral are more interest rate rises and the unemployment and household distress this would cause,” he said.