The four big reasons Australia’s economy is in crisis – and why life is set to get even tougher for struggling families
Australia’s economy faces four key challenges amid an ongoing cost-of-living crisis that is crippling families.
The country’s current account plunged into a deficit of $4.9 billion in the first three months of 2024 – far less than the originally forecast surplus of $5.1 billion.
Throughout the March quarter, the volume of goods exports declined, reflecting reduced local coal and iron ore production.
However, this was more than offset by an increase in good import volumes, led by a sharp replenishment of consumer goods inventories.
Opposition Treasury spokesman Angus Taylor noted in Question Time on Tuesday that domestic inflation is “growing five times as fast as imported inflation”, with core inflation rising to 4.1 percent in April – which is higher than in the UK, US, Japan and Canada.
‘After three failed Labor budgets that pushed up the price of groceries, electricity and mortgages, [will] the Treasurer finally admits, as the RBA Governor noted, that inflation is homegrown,” he asked.
Treasurer Jim Chalmers accepted that inflation “remains too high” but pointed out that “inflation had a six ahead” when Labor took office in May 2022.
Treasurer Jim Chalmers accepted that inflation “remains too high” but pointed out that “inflation had a six ahead” when Labor took office in May 2022.
‘We recognize that at a three it is still too high, but it is almost half of what we inherited from that [opposite].
‘We pay too much interest on the debts, we had almost nothing to show for all the waste and mistakes for which the shadow treasurer was the textbook example.
“We spent two years cleaning up the mess we inherited.”
Services exports rose throughout the March quarter as the increase in tourism was partly offset by falling international student numbers.
As a result of lower commodity prices for Australian iron ore and coal exports, in addition to a decline in petrol prices on the import side, the Australian trading rate increased slightly.
As a result, net exports fell to $17.8 billion, with the decline expected to shave 0.9 percentage points off Wednesday’s March GDP reading, worse than the 0.6 reduction analysts had forecast.
The country’s current account plunged into a $4.9 billion deficit in the first three months of 2024 – a far cry from the $5.1 billion surplus originally forecast
Separate data released on Tuesday also showed inventories rising as companies added more inventories than expected during the quarter.
“Some of this weakness will be offset by a rise in inventories,” said Sean Langcake of Oxford Economics Australia.
“But net exports will deliver weaker-than-expected growth in the March quarter.”
After the new figures, economists will refine their forecasts for the March quarter national accounts due to be published on Wednesday.
Reflecting weakening consumer spending and slowing construction activity, figures are expected to show the economy grew by a paltry 0.2 percent in the three months to March, unchanged from the December quarter figures.
An outcome in line with consensus forecasts would be an annual growth slowdown from 1.5 percent to 1.2 percent, well below the projected population growth of 2.5 percent, and a deepening of Australia’s per capita recession for the fourth consecutive quarter.
