The Australian economy saw modest growth in Q1 2024 with quarterly GDP (Gross Domestic Product) edging up by 0.13% and annual GDP increasing by
1.65%.

Despite these gains, this annual growth rate is the smallest (outside of the pandemic period) since September 1992.

Moreover, economic output is failing to keep pace with the country’s strong population growth, marking the fifth consecutive quarter of decline in GDP per capita.

Household expenditure increased by 0.43% in Q1, surpassing expectations. However, long-term growth remains modest as households grapple with rising cost of living pressures and higher mortgage repayments.

Spending on essential goods and services rose by 0.5%, while discretionary spending also rebounded by 0.3%, driven by sporting and cultural events, and holiday travel.

Higher private consumption has contributed to a pickup in CPI growth to 0.96%, outstripping the wage price index increase of 0.6%.

Consequently, the household savings ratio dropped to 0.9%, significantly below the long-term average since Q4 2022.

With a minimal savings buffer and increasing inflation, private consumption is likely to moderate, particularly as the possibility of an interest rate hike grows.

Affordability concerns and high construction costs continue to hinder new dwelling investments.

Building approval activity has diminished significantly as fewer prospective buyers feel it is a good time to enter the market.

This trend is adding pressure to the rental sector, which is already strained by record population growth, resulting in historically low vacancy rates and rising rental prices.

This article references findings from our Q1 2024 Economic and Residential Property Market Report.