Australians are buying EVs instead of holidaying in Europe – and other things we learned from the national accounts

ABS’s snapshot of Australia’s accounts shows economic growth – albeit low – in the face ‘challenging international circumstances’

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The Australian Bureau of Statistics released its latest set of national accounts, which give us a snapshot of how the economy is performing in the quarter and what’s happening under the hood.

Jim Chalmers called it a “robust result in challenging international circumstances”.

“The Australian economy has obvious strengths, but we can still see in these numbers our three primary challenges: inflation, productivity and global volatility, and we know that each of these puts pressure on people,” the federal treasurer told reporters.

Economists predict the economy will continue to slow through 2026, moving towards 1.3-1.5% growth by the end of the year as the Reserve Bank’s interest rate hikes and the high cost of living drag on spending and activity.

Stephen Smith, a partner at Deloitte Access Economics, said the “accounts show too little growth and too much inflation”.

Just as the pandemic led to some big swings in behaviours and spending patterns, so has this year’s big shock – the Middle East conflict.

The national accounts showed disposable household incomes, after inflation, lifted by a respectable 0.6% in the quarter. That slipped to just 0.3% after adjusting for population growth, but it was at least positive.

Belinda Allen, CBA’s head of Australian economics, said this showed households were “largely insulated from the Middle East conflict over the quarter” and there was “only partial pass through of interest rate hikes to date”.

What we didn’t do was fly north for the winter. War in the Middle East put the dampers on international travel, not least as high jet fuel costs pushed up the price of air fares.

Grace Kim, the Australian Bureau of Statistics’s head of national accounts, said “the number of Australians travelling overseas for the northern hemisphere summer fell for the first time since the Covid-19 pandemic”.

Instead of holidays under the northern sun, we splurged on fuel-efficient and electric vehicles.

Record sales of EVs and hybrids bolstered spending in the quarter, the ABS said, accounting for three-quarters of the 0.4% quarterly growth in consumption.

Vehicle purchases jumped by 10% in three months as we continued to shift away from gas guzzlers in an attempt to protect ourselves from pain at the pump, both today and in the future, and were helped along by government subsidies.

Still, Smith said that absent the spending on fuel-efficient and electric cars, consumption was “far too weak to suggest households are shrugging off cost-of-living challenges”.

That said, the household saving rate lifted from 6.4% to 6.5% – pretty much its 20-year average – suggesting households continue to add to their buffers.

While the economy is expanding, this is entirely due to a higher population – an unfortunate hallmark of Australia’s since the end of the pandemic.

Growth in real GDP per person shrank by 0.1% in the three months to June (recalling overall total GDP expanded by 0.5%), and was zero in the previous quarter.

Per capita GDP was up by only 0.7% over the year, still below its 2022 peak – and at this rate, won’t get there any time soon. It’s the broadest measure of living standards, and reflects the lived experience of many Australians labouring through a high-cost and low-growth economy.

Jonathan Kearns, the chief economist at Challenger, said “growth in GDP per capita has clearly slowed compared with the pre-pandemic period”.

Our lacklustre productivity performance explains stagnating living standards, and there was no joy in the national accounts by this measure.

Real GDP per hour worked – the measure of labour productivity – was flat in the June quarter and 0.2% lower through the year.

Kearns pointed out that it’s difficult to raise living standards when productivity growth has averaged just 0.1% since 2018.

“Perhaps AI will eventually boost productivity growth and improve the trend in GDP per capita and living standards,” he said.

“But that will take time and does not lessen the need for productivity-enhancing reforms and winding back red tape.”