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What is the GDP, and why are analysts saying the economy is “very weak”?

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What is GDP? Everything you need to know about the current state of Australia's economy, and why some analysts have called it "very weak".
What is GDP? Everything you need to know about the current state of the economy.

The economy grew by 0.1% over the past three months. The news comes as the head of Australia’s central bank today described the economy as “very weak”.

The latest gross domestic product (GDP) figures shows the economy’s growth has slowed compared to the last three months of 2023.

It’s the weakest quarterly growth since September 2022.

What is the GDP?

Gross domestic product (GDP) refers to the value of goods and services produced in a country over a certain time.

In last month’s Federal Budget, the Government predicted GDP would grow by 2% across the next three financial years (1 July-30 June).

If GDP is negative for six months in a row, economists say the economy is in a recession, or “shrinking”.

Today’s results, released by the Australian Bureau of Statistics (ABS), revealed that GDP rose by 0.1% in the three months to March 2024. The annual GDP growth was 1.1%.

In a statement, the ABS’ head of national accounts Katherine Keenan said: “GDP growth was weak in March.”

However, it noted that spending on “gambling, sporting and musical events” increased over the quarter. Earlier this year, Sydney and Melbourne hosted pop star Taylor Swift, selling roughly 620,000 tickets.

“Very weak”

Earlier today, Reserve Bank Governor Michele Bullock told the Government the economy was “very weak”.

“We are in a position where the economy is very weak… we’ve got consumption, people cutting back on discretionary expenditure.”

Bullock said she had expected lower GDP figures because spending is slowing for most age groups, especially among younger people.

Government response

Treasurer Jim Chalmers said household spending has been dominated by essentials.

This includes spending on things like groceries, electricity, and rent, which have all increased due to inflation (rising prices).

He said Australians are also paying roughly $30 billion in mortgage interest because of higher borrowing rates.

Chalmers said the economy is “barely growing” as “people are under pressure”.

Opposition

Shadow Treasurer Angus Taylor pointed out that the figures show the slowest GDP growth since 1991, outside of the COVID pandemic years.

He blamed Labor’s handling of the economy for rising interest rates, poorer productivity, and higher inflation.

“We need to get the economy back on track and back to basics and restore Australians’ standard of living,” Taylor said.

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