Prime Minister Scott Morrison says the Australian economy faces “real challenges” due to global factors after growth slowed down in the final months of 2018.
The economy grew by 0.2 per cent in seasonally adjusted terms in the three months to December and by 2.3 per cent in the year to December, according to the latest national accounts released by the Australian Bureau of Statistics on Wednesday.
The figures have failed to meet the expectations of both economists and the central bank.
Gross Domestic Product per capita – which adjusts for population growth to gauge changes in a country’s living standards – fell by 0.2 per cent, on the back of a 0.1 per cent fall in the September quarter.
The two consecutive quarterly falls represents a recession in GDP per capita terms, which is only the third of its type in the past 27 years.
“I have been warning since last year, I was warning as Treasurer … living standards as measured through the national accounts has continued to grow,” Mr Morrison told reporters on Christmas Island.
“But what I do know is that the Australian economy does face real challenges globally.”
Treasurer Josh Frydenberg put the challenges to the economy – and his first federal budget due on April 2 – down to the drought affecting eastern states, lower mining investment and a decline in housing construction.
But the treasurer wants people to see the bright side too, with Australia’s economy continuing to grow faster than any G7 nation but the United States.
“The Australian economy is in fundamentally good shape,” Mr Frydenberg told reporters in Canberra.
Compensation of employees – which measures wages and salaries – was up by 0.9 per cent in the December quarter and 4.3 per cent in the year.
Mr Frydenberg said that shows wage growth is starting to pick up, with the annual figure above the five-year average of 3.4 per cent.
But he recognised there is more work to be done, reiterating the sentiment that wages will increase further as the job market tightens.
“Improving the income of wage and salary-earners does remain a core focus for the government,” Mr Frydenberg said.
Labor’s shadow treasurer Chris Bowen says the GDP per capita recession shows Mr Morrison and Mr Frydenberg have been poor economic managers.
“This is a damning indictment of the economic stewardship of Scott Morrison and Josh Frydenberg,” he told reporters in Sydney.
Mr Shorten earlier told a business event in Sydney the next election will be a “referendum on wages”.
“It will be a contest about who the economy should work for, in whose interests the system should serve,” he said.
Mr Morrison joked that the only wages that would go up under Mr Shorten were “the wages of the people smugglers”.
The latest national accounts may prompt economists to renew their prediction the central bank will be forced to cut the official cash rate at least once in 2019.
The RBA on Tuesday held at the rate at 1.5 per cent for the 31st consecutive month.