Australia’s economy is growing at its slowest pace in over 30 years, outside of the pandemic period, which could pave the way for an interest rate cut in the near future. According to the Australian Bureau of Statistics, the nation’s gross domestic product (GDP) increased by just 0.2% in the June quarter and by 1.5% during the 2023-24 financial year.
This rate of growth marks the weakest annual expansion since the 1991-92 financial year, excluding the pandemic years, signaling a marked slowdown in economic activity.
Interestingly, while the economy grew, Australia’s population expanded at a faster rate. As a result, GDP per capita actually fell by 1.0% during the last financial year. In simple terms, while the overall pie got 1.5% larger, each person’s slice of that pie got 1.0% smaller.
This economic slowdown is not unexpected. The Reserve Bank of Australia (RBA) significantly increased interest rates in 2022 and 2023 to slow down the economy and curb inflation. The latest data confirms that this strategy is working. The economy is weakening, inflation is falling, and unemployment is rising.
As inflation continues to decrease, the RBA may feel it is close to achieving its goal of crushing inflationary pressures. Once the RBA believes inflation has been sufficiently subdued, it may consider reducing the cash rate, which could lead to lower mortgage rates.
The current economic climate suggests that an interest rate cut could be on the horizon, offering some relief to homeowners and borrowers who have faced rising mortgage costs over the past two years.
