Despite the positive GDP growth, Australia recorded a current account deficit of $52.4 billion in 2024, the highest since 2016.
Australia’s economy is showing signs of a rebound, with new data from the Australian Bureau of Statistics (ABS) revealing a 0.6 percent rise in Gross Domestic Product (GDP) last quarter.
Annual GDP growth reached 1.3 percent, improving from the previous period’s 0.8 percent.
The latest figures indicate that both public and private spending contributed to the growth, alongside a boost in exports.
For the first time in nearly two years, GDP per capita increased, albeit modestly, by 0.1 percent.
In nominal terms, GDP grew by 1.6 percent, reflecting rising domestic prices and stronger trade conditions.
Labour costs pushed up service prices, including accommodation, airfares, and rent.
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Meanwhile, the terms of trade, where export value is measured against imports, climbed 1.7 percent, marking the first increase after three consecutive declines.
Treasurer Hails Rebound, Opposition Calls It a Mirage
Treasurer Jim Chalmers welcomed the figures, saying they showed the economy was “turning a corner.”
“Inflation is down, incomes are strengthening, unemployment is very low, interest rates are coming down, and now growth is picking up. This is a solid rebound,” he said.
However, Shadow Treasurer Angus Taylor previously criticised the Albanese government’s economic management.
“Whether it’s living standards, productivity, or real wages, if Labor’s plan continues, Australians will be poorer for a decade,” he said in February.
“If you can’t manage the economy, you can’t manage a cost-of-living crisis. The only way to get back on track is to elect a Coalition Government that will restore prosperity, defeat inflation, and grow our economy for the next generation.”
Chalmers said the turnaround was significant compared to what Labor inherited.
“When we came to government, real incomes were going backwards by 1.6 percent,” he said. “There are good reasons to be more optimistic about 2025 given the encouraging way our economy finished 2024.”
Trade, Consumer Spending Drive Growth
Australia’s export sector played a major role in the economic uptick, contributing 0.2 percentage points to GDP growth in the December quarter.
Export prices jumped 2.5 percent, largely driven by China’s economic stimulus, which boosted demand for Australian minerals. Prices for liquefied natural gas (LNG) and agricultural goods also rose, reflecting strong global demand.
However, import prices edged up slightly due to a weaker Australian dollar.
Household spending increased by 0.4 percent, supported by strong sales in furniture (up 1.9 percent) and clothing (up 1.2 percent), largely driven by Black Friday and Cyber Monday sales.
Restaurants and hotels saw a 1.5 percent boost, helped by major sporting and music events. Essential spending also rose, with healthcare up 1.5 percent and electricity and gas costs increasing by 1 percent due to the summer heat in New South Wales and Victoria.
Government spending grew 0.7 percent, with increased investment in health, education, and policing. Defence spending also rebounded after two weaker quarters.
Wages and Savings See an Uptick
The labour market remained strong, with employee compensation rising by 2 percent. By December, the unemployment rate had tightened to 4 percent, and hours worked increased by 0.7 percent, surpassing long-term averages.
Higher wages boosted household disposable income by $5.9 billion, lifting the household savings-to-income ratio from 3.6 percent to 3.8 percent. With income growth outpacing spending, households saw some relief from rising costs.
While the data points to a steady recovery, challenges remain, including high living costs and global market uncertainties.
Australia’s Largest Deficit Since 2016
Despite the positive GDP growth, Australia recorded a current accounts deficit of $52.4 billion in 2024, the highest since 2016.
In the December quarter alone, the deficit stood at $12.5 billion, though it improved slightly by $1.3 billion from the previous quarter.
Treasury’s Mid-Year Economic and Fiscal Outlook (MYEFO) had projected a reduced deficit of $26.9 billion for the financial year.
However, over the next four years, combined deficits are now expected to reach $143.9 billion, $21.8 billion worse than previous forecasts.
Australia’s trade surplus rose by $3.7 billion to $7.5 billion, driven by strong iron ore, gold, and agricultural exports. However, rising payments to foreign investors offset these gains, pushing the net primary income deficit to $19.8 billion.
In December, John Humphreys, chief economist at the Australian Taxpayers Alliance, blamed excessive government spending for the worsening budget deficit.
“The 2023/24 deficit ballooned from $29 billion to $47 billion, largely due to discretionary spending, including the government’s commitment to partially pay off university fees for graduates,” he said.
