Australians consumed by a need to save
Consumers have gone on a "spending strike" despite a rise in household incomes, crimping growth in the Australian economy.
Federal Treasurer Josh Frydenberg on Wednesday fended off suggestions the government needed to do more to stimulate the economy after the growth rate clocked in below expectations.
Official figures reveal an unwillingness among consumers to spend contributed to the lacklustre growth rate during the three months to September.
The economy, measured by gross domestic product, grew 0.4 per cent over the quarter.
That was enough to lift the annual rate to 1.7 per cent, from 1.4 per cent three months earlier, according to seasonally adjusted figures from the Australian Bureau of Statistics.
But the quarterly result fell short of expectations for a reading of 0.5 per cent and was below an upwardly revised figure for GDP growth the previous quarter of 0.6 per cent.
The figures indicate the economy, while past its worst, might be struggling to build momentum amid persistent weakness in household spending and a severe downturn in residential construction.
In a research report, Westpac economists said consumers had gone "on a spending strike".
Household consumption grew only 0.1 per cent in the quarter, they noted.
"The federal government and the Reserve Bank will be disappointed with this result," the report said. "Despite a solid boost to incomes, the cautious consumer has chosen to lift its savings rate and hold spending effectively flat.
"The lift in savings is over and above the policy stimulus, suggesting heightened risk aversion."
In June and again in July - the first month of the quarter - the RBA cut the official cash rate while many taxpayers were due to receive one-off rebates following tax cuts.
ABS chief economist Bruce Hockman said: "The reduction to tax payable did not translate to a rise in discretionary spending, which led to a visible impact to household saving".
Commonwealth Bank chief economist Michael Blythe said the "weakness in household spending is the main domestic risk facing the Australian economy".
"The weakness reflects the extended period of lacklustre growth in household incomes and the inevitable downturn after the biggest residential construction boom we have ever had," Mr Blythe said. Mr Frydenberg would not be drawn on whether the government would announce new spending or policy initiatives at its mid-year Budget update.
He made a virtue of households' prudence, while pointing to a growing pool of future spending power.
"At the end of the day people are doing what we are doing at the federal level, which is paying down debt," Mr Frydenberg said.
"If people pay down their debt, then ultimately they will have lower interest payments and that will free up more money to spend across the economy.
"So it does represent a bit of a timing issue, but ultimately our goal is for Australians to get more money in their pocket and that's what we've done with the most significant tax cuts in more than 20 years, and it's up to the Australian people whether they choose to save or to spend."
After jumping 3.1 per cent over the year to June 2018, Australia's GDP grew a mere 1.4 per cent the following year.
The growth rate for the past year is well short of the level - about 2.75 per cent - that is considered the longer-term trend rate for Australia, but does extend the recession-free streak for the economy that stretches back to June 1991.