SYDNEY (Reuters) - Australia likely equaled the world record for the longest stretch of uninterrupted economic growth last quarter, yet celebrations will be muted as miserly wage growth saps the spending power of its citizens.
Analysts estimate Australia’s A$1.7 trillion ($1.27 trillion) annual gross domestic product (GDP) grew a slim 0.2 percent in the first quarter, a setback from the previous quarter’s brisk 1.1 percent. ECONAU
The GDP report, due out on Wednesday, is also forecast to show annual growth slowed to 1.6 percent from 2.4 percent.
That would still mark 103 quarters without a recession, a feat only matched by the Netherlands in modern history, but workers will be wondering where the rewards are going.
Government figures out on Monday showed wages and salaries paid by businesses across the country bounced just 0.3 percent in the first quarter, after a 0.5 percent drop the previous quarter.
Wage growth for the year to March was only 0.9 percent, well below consumer price inflation of 2.1 percent.
“Spare capacity in the labor market is expected to continue to weigh on wage growth over the next year,” said David Plank, head of Australian economics at ANZ.
“This in turn, is likely to have implications for consumption growth given the high levels of household debt and expected moderation in house price growth.”
The danger is all the greater as household debt is at all-time highs and red-hot housing markets in Sydney and Melbourne are vulnerable to a major correction.
The heat in housing has made the Reserve Bank of Australia (RBA) reluctant to cut interest rates further, even as consumers struggle.
The central bank holds its June policy meeting on Tuesday and is considered certain to keep rates at 1.5 percent, where they have been stuck since May last year.
Some analysts had feared the economy may actually have gone backwards in the first quarter following disappointing readings on retail sales and home building.
The risk of an outright contraction did look to have diminished slightly on Monday as data showed inventories held by firms jumped a surprisingly large 1.2 percent in the quarter.That alone should add around 0.4 percentage points to GDP, when analysts had expected next to nothing.
Businesses also seemed to be doing better than their workers when it came to making money. Company gross operating profits rose 6.0 percent in the March quarter to be up no less than 40 percent for the year.
Profits in the mining sector more than doubled in the year as prices for iron ore and coal spiked, though much of those gains evaporated in the last couple of months.
Reporting by Wayne Cole; Editing by Eric Meijer