Households hold strong as rates rise

The state’s economy grew 0.6 per cent in the three months to September, despite a fall in business investment.

Measured by state final demand, which excludes trade, Western Australia’s economy produced $59.4 billion in the quarter.

That was 3.2 per cent bigger than this time last year.

Business investment fell 1.7 per cent in the quarter, driven largely by machinery and equipment purchases slowing in the mining industry.

Spending on new houses slumped by 3.4 per cent, amid an industry crisis, and investment into intellectual products dropped 2.2 per cent.

But household spending proved resilient, despite aggressive tightening of interest rates, rising 2 per cent.

The biggest rises were in travel (up 30.3 per cent), and utilities spending (38.4 per cent higher) following the wind down of special government subsidies on power bills.

Nationally, gross domestic product lifted 0.6 per cent in September to be up 5.9 per cent compared to the year prior.

“Higher borrowing costs and elevated inflationary pressures are starting to cool demand,” St George Bank said in a research note.

“ However, the Australian economy remains on a strong foundation.

“The annual surge reflects weak growth in the September quarter of last year due to lockdowns.”

The bank said households were cutting into their savings as inflation drives up prices.

Moody's Analytics said hurdles were stacking up for the Australian economy, including rising inflation, floods, and falling property prices.

“But like Ali in the Rumble in the Jungle, the economy continues to duck and weave,” the company said.

“A few glancing blows landed in the September quarter, but the economy grew 0.6 per cent quarter on quarter, building on the prior period’s solid 0.9 per cent expansion.

“All eyes were on households in the latest national accounts. 

“With inflation surging, the Reserve Bank of Australia is doing all it can to wrestle wallets out of the hands of households; higher rates aim to quell surging demand and realign it with the still partially constrained supply. 

“But households aren’t sitting down quietly. 

“Stripping out the impact of higher prices for the goods and services being bought, the volume of new purchases rose a solid 1.1 per cent (quarter on quarter) in September.”