“Politics needs to lean more strongly against rising inflationary pressures,” he said.
“As such, we believe that the strength of price and wage measures in GDP data should be enough to convince Governor Lowe that there is a very strong argument for deviating from a normal rule. [0.25 percentage point] get moving and get the cash rate a little higher, a little faster. “
The March quarter covered the period when much of southern Queensland and northern NSW were affected by deadly flooding. The Treasury expected this to reduce growth by about 0.25 percent.
Floods in areas such as Lismore affected growth during the March quarter, but the economy as a whole remains strong. Credit: Disaster Relief Australia
ABS found that not only had the economy grown through the floods, it also challenged the outbreak of the Omicron variant that affected many companies during the period.
Household spending contributed 0.8 percentage points to growth during the quarter, while government spending rose 0.6 percentage points.
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Spending on discretionary goods and services rose 4.3% and is now back above pre-pandemic levels for the first time.
Transportation spending rose 60 percent, due to the reopening of state and international borders, while spending on recreation and culture (4.8 percent) and restaurants (5.3 percent) was also strong. Supply constraints were reduced to new car imports, contributing a 13% increase in spending.
In fact, commodity spending fell 0.2%. Expenditure on food was reduced by 2% as people were able to eat out in cafes and restaurants. Health spending also fell.
Barrenjoey chief economist Jo Masters said the household savings buffer, which at 11.4% is more than double the mid-2019 rate of 5.3%, and that rising wages should keep consumer spending strong.
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“The ongoing economic expansion will be largely determined by how much consumers decide to spend or save,” he said.
Leading Deloitte Access partner Pradeep Philip said the figures suggest the economy was on the needle.
“There is still a lot of strength in the public sector and in households, but the private sector of the economy in areas such as investment still has a long way to go,” he said.
While the economy expanded by 0.8%, GDP per capita grew by a much more modest 0.3%. It is the biggest gap between the two measures since early 2018.
At the state level, the Victorian national economy expanded by 2.4%, the national best during the quarter, thanks to large increases in household and government spending.
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Final state demand in both Western Australia and the Northern Territory rose 2.2%, while in NSW it rose 1.2% and in Queensland 0.8%.
Defense spending rose 5.6 percent in the March quarter as Defense was called in to provide flood assistance.
Defense spending in NSW and Queensland together rose by 7.8% while in the rest of the country it was 3%.
Insurance claims rose sharply due to flooding. Non-life insurance claims rose 18.6 percent in the March quarter, to $ 2.8 billion paid due to natural disasters. ABS expects the reconstruction effort to contribute to future GDP figures.
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