(Australian Associated Press)
Australians saved less of their pay packets in the three months to September than they have in 11 years, but Treasurer Josh Frydenberg says that shows they’re feeling good about the state of the economy.
The falling household saving ratio is also a product of low interest rates, Mr Frydenberg said while unpacking Australia’s latest economic growth figures on Wednesday.
Growth slowed to 0.3 per cent in the September quarter, and to 2.8 per cent over the past 12 months, according to the official figures from the Australian Bureau of Statistics.
That missed market expectations of 0.6 per cent growth for the quarter and 3.3 per cent growth for the year.
Australians splashing their cash was vital to growth in the three months to September, the data shows, with household consumption up by 0.3 per cent.
The spike was largely driven by more spending on essentials, such as food and housing.
Spending on non-discretionary items such as cars, furniture and clothing and footwear slowed.
Net exports also helped growth along, driven by a decline in imports, and compensation of employees grew by one per cent in the quarter
In the three months to September, among the biggest drags on growth was a dip in new business investment of 1.9 per cent.
Mr Frydenberg said that was largely due to mining projects in the Northern Territory and Western Australia wrapping up and heading into their production phase, with non-mining investment remaining fairly flat.
He did not seem alarmed by the household saving ratio declining to 2.4 per cent in the September quarter, the lowest it has been since December 2007.
“The household savings ratio is a reflection of people’s confidence in the economy, that they feel they can spend, and it’s also a reflection of the historically low interest rates,” he said.
The figures show the health of the economy, the treasurer stressed.
“The strength of the Australian economy is the product of sound economic management.”
He acknowledged wage growth has been slower than the government would like, but reiterated the central bank’s prediction wages will rise as the economy keeps growing and unemployment continues to fall.
But shadow treasurer Chris Bowen said the latest growth is “very disappointing” in such a positive international economic environment.
The Labor spokesman said it was bizarre Mr Frydenberg would claim the household saving ratio dip was due to people’s confidence.
“Australians are saving less because their budgets are under real pressure. Wages aren’t going up enough, and costs are going up too much,” he said.
Business investment could be boosted if government policies and personnel were more stable, Mr Bowen said.
“What the economy needs above all is stability and certainty,” he said.