Since the world returned to some semblance of normality two years ago, Australia has been hailed as an example of how to do things right. Despite having some of the strictest measures in the world during the difficult times of 2020 and 2021, Australia’s economy has thrived in 2022 and the first half of 2023. But are the economic difficulties being faced by the rest of the world starting to have repercussions in the Land Down Under?
The latest data from the Australian Bureau of Statistics (ABS) suggests that could be the case, as Australians have reduced spending in key areas over recent months. Specifically, while spending has increased on essentials like food, this has been due to soaring prices. Meanwhile spending on discretionary items like furniture, clothes and electronics has dropped. Can Australia continue to prosper as the economic storm clouds gather?
Rate of spending increase hits a new low
Robert Ewing is the head of business indicators at ABS. He commented that while year on year spending has increased by 3.3 percent from 2022 to 2023, the rate of increase is the lowest since 2021, when Australians were battened down at home. Given the increase in costs, this actually represents a cut in spending.
Specifically, spending on clothing and footwear has fallen by 3.4 percent over the past year, while spending on furnishings and household equipment is down by 4.8 percent. However, spending on food increased by almost six percent.
Casino gaming bucks the trend
The Australian fascination with gambling is the stuff of legends. Over the past decade, spending on gambling has hung around an annual total of $1,000 per capita, well above the spending level of any other nationality.
Over the past five years, that rate has been on a steady downward trajectory, and that remains the case, although gambling spend is actually projected to show a slight increase from 2022 to 2023. This industry represents an interesting case because “spend” is defined as net revenue generated by the gambling business – or in other words net losses sustained by the gambler.
This means Australians could be gambling more, as suggested by industry statistics, but “spending” less by gambling smarter and sustaining fewer losses. The rising popularity of online casinos with lower minimum deposit requirements is a contributing factor – see https://www.casinoaus.net/minimum-deposit/ for more details.
The slight increase recorded over the past 12 months is believed to be down to punters returning to land-based casinos, where higher overheads mean there are not the same promos, free bonuses and so on that can be found online and consequently, the cost to the gambler is a little higher than when he or she plays online.
Australia’s economy hits the wall
While GDP has remained steady, the nation’s overall economy ground to a halt in the third quarter, and commentators were surprised by the sudden turnaround. Andrew Hanlon is an economist at Westpac and said the economy had “hit the wall.” He blamed the “intense headwinds of high inflation, sharply higher interest and additional tax obligations” saying they had a significant impact and led to a “sharp decline in real household disposable income.”
Regional variations, with WA hit hardest
So far, Western Australia has shown the largest increase in spending at 4.7 per cent. The main contributors being spending on transport and health. South Australia and ACT were not far behind, and the sharp increase in food costs was responsible for most of the spend.
The Northern Territory has been least affected by the economic slowdown, with only a slight increase of less than one percent during the year.
An economy on a knife edge
The question of whether Australia can weather the dip and avoid full-blown recession will be answered in the coming months. So says Gareth Aird at Commonwealth Bank, who told Reuters there is a clear risk that real GDP growth could turn negative in the fourth quarter. However, he also feels that rates have peaked and an easing cycle will be underway by this time next year.