Australia’s economy contracted on a per capita basis for the second successive quarter during the final three months of last year as “soft” household spending and a drop off in dwelling investment weighed down the gross domestic product (GDP).

Analysts had warned of slowing growth and a possible recession in recent days following a batch of lackluster reports on wages, jobs and factory activity, and the latest official data shows the economy did decline by 0.2% during Q4. The latest fall follows the 0.1% downturn recorded during the three months to September.

Both of those figures do not take the impact of population growth into account, but the picture remains rather gloomy even when it is factored in as the economy expanded by a rate of just 0.2% in Q4. The lackluster uptick means Australia’s economy only grew by 2.3% in 2018, which is short of the Reserve Bank’s optimistic 2.8% forecast.

Annualized growth is also on a downward trajectory after coming in at a modest 1% for the final six months of last year. That is in stark contrast to the comparatively brisk 4% rise recorded during H1 2018, and again points to growing pressure on the economy amid challenging conditions on several fronts.

ABS chief economist, Bruce Hockman said growth was not buoyant during the three months to December. He noted on Wednesday: ‘Growth in the economy was subdued, reflecting soft household spending and a decline in dwelling investment.”

Treasurer Josh Frydenberg recently claimed the International Monetary Fund (IMF) had given Australia’s economy a “big tick” despite the specter of growth risks, and he insisted again in mid-week that the basic fundamentals are robust even though there has been a recent slump in consumption spending.

Mr. Frydenberg added: “It was a challenging year in halves when it comes to growth – strong quarters in March and June, and slower than that in September and December.’

Consumption has been a particular weakness during the last six months and it rose by just 0.4% in Q4. However, the lack of activity in the domestic sector was also matched by the private sector, which failed to contribute anything of note to GDP growth during the latest quarter after adding 0.4% points in each of the three-month periods during the last year.

The main drive of economic growth during Q4 was government spending. “Public investment remained at high levels with state and local government growth of 6.3% reflecting continued work on a number of large infrastructure projects,’ Mr. Hockman added. ‘This investment translates to ongoing strength from the healthcare industry, which remains the largest contributor to economic growth.’

ANZ’s Felicity Emmett believes the latest figures came short of reasonable expectations and that the household sector did not do any heavy lifting in Q4 as poor vehicle sales and spend on utilities and household goods dragged the economy lower. She added: “The motor vehicles and household goods are probably related to credit tightening and perhaps an impact of the wealth effect.”

Ms. Emmet warned of more problems on the horizon after household income failed to match the rate of consumer spending, which points to a widely believed expectation that income will soon rise. However, she noted that is unlikely due to the ongoing concerns about slow wage growth, a topic that Reserve Bank governor Philip Lowe has commented on recently.

Citi’s Paul Brennan also touched on the rise in savings seen during Q4 and how it is linked to falling housing prices, and the poor growth of income. He concluded: “Although nominal [non-inflation adjusted] GDP is growing strongly … the share going to employees has declined in contrast to a rising profit share.’