The Australian economy grew by 0.1% q/q in the first quarter of 2024, slower than the 0.3% q/q rise in the previous quarter and the 0.2% q/q increase that markets had expected.
Overall, there was weak domestic demand as increased consumer spending was offset by a decline in aggregate investment. The report also explained that the build-up of inventories partially offsets the increase in imports.
On an annual basis, GDP expanded by 1.1% versus an upwardly revised Q4 rise of 1.6% and an expected increase of 1.2%. The 1.1% growth represents the slowest annual increase since December 2020.
On a per capita basis, GDP contracted for the fifth consecutive quarter by -0.4% (-1.3% y/y).
Link to Australia's GDP report
In response to the report, Australian Treasurer Jim Chalmers said:
“The main reason for this very weak growth is high interest rates, coupled with moderate but persistent inflation and continuing global uncertainty.”
“This (result) justifies the government’s approach to fighting inflation without crashing the economy, when growth was already weak and people were already under pressure.”
He said this growth was “below average market expectations,” but welcomed “any growth” in light of “the local and global conditions we face.”
Market reactions
Australian dollar against major currencies: 5 minutes
Overlay of the Australian dollar against the major currencies Chart by TradingView
Australian dollar traders mostly ignored the disappointing Australian GDP reading, perhaps due to the delayed nature of the report and Treasurer Chalmers' indication that the results vindicate the direction of the Reserve Bank of Australia's monetary policy and the latest government budget. The slightly improved risk environment didn't hurt either.
The Australian dollar, which had begun to gain support at the start of the session, saw a new high on the report before seeing minimal declines across the board.
The Australian dollar remains in the green against its major counterparts, recording most of the gains against safe havens such as the Japanese yen and the Swiss franc while seeing limited increases against other currencies such as the New Zealand dollar and the Canadian dollar.
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