On Tuesday, the Australian Bureau of Statistics (ABS) released data showing that gross domestic product (GDP) in Australia rose only 0.5% in the fourth quarter of 2022. This is a drop from the previous quarter’s 0.7% growth and below analysts’ expectations of 0.8%. This marks the weakest GDP growth in a year, with rising interest rates and high inflation being cited as the main causes.
The ABS also reported that the Consumer Price Index (CPI) came in at 7.4% in January, lower than expected but still at a very high level. This may put pressure on the Reserve Bank of Australia (RBA) to continue raising interest rates, which could reach as high as 4.35% by mid-year.
At a meeting on February 7th, the RBA’s Monetary Policy Committee raised the policy rate by 25 basis points to 3.35%. This marks the ninth consecutive month of interest rate hikes and is the longest on record. The data released by the ABS suggests that the Australian economy is likely to slow down further in the coming months.
The effects of rising interest rates and high inflation are being felt throughout the Australian economy, with many industries struggling to cope with the increased costs of borrowing and operating expenses. This is particularly evident in the housing market, where higher interest rates have led to a drop in demand and a slowdown in construction.
The RBA has stated that it is committed to ensuring price stability and maintaining the health of the economy, but the data suggests that more may need to be done to prevent a further slowdown. As the situation develops, it remains to be seen what measures the RBA will take to support the Australian economy in the coming months.