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Isaac Robinson

March Economic Update 2024

Written by Isaac Robinson

Australian Economic Update:

In Australia, Gross Domestic Product (GDP) rose by 0.2% in the December quarter, marking nine consecutive quarters of GDP growth. This growth was driven by government expenditure and business investment. However, domestic demand continued to slow in the December quarter as households cut back on discretionary spending, while investment slowed following 3 quarters of growth. The RBA maintained the cash rate at 4.35% over the whole quarter as inflation continued to fall. In the December quarter, annual CPI inflation was 4.1%, down from 5.4%. The most significant price increases were Tobacco (7.0%), new dwelling purchase by owner-occupiers (1.5%), domestic holiday travel and accommodation (3.9%), and medical and hospital services (1.2%). The Wage Price Index grew at a faster rate than inflation, rising by 4.2% (up from 4.0% in the September Quarter), and unemployment remained at 3.8%. Finally, over the past quarter, the Australian Dollar has weakened against the US Dollar (0.68 to 0.65) and the Chinese Yuan (4.81 to 4.64).

World Economic Update:

The United States is responsible for approximately 25% of global GDP. Due to the size of their economy, the economic health of the US has a global impact. GDP grew at an annualised rate of 3.2% in the December quarter, compared to 4.9% in the September quarter. The Federal Reserve has decided to not increase rates again, with the target remaining at 5.25 – 5.50% since the increase in July. However, the Fed officials think there will be 3 rate cuts by the end of the year. In December inflation increased to 3.4% in December (up from 3.1% in November), before falling back to 3.1 in January, then increasing again to 3.2% in February. Looking at the longer-term chart, it appears that the Fed has not been able to slow inflation lower than 3%.

As China is responsible for approximately 19% of global GDP, it is also very important on the global stage, especially to us here in Australia. According to the National Bureau of Statistics of China, annualised GDP growth was 5.2% over the December quarter, up from 4.9% in Q3. After cutting rates in Q3 to try and boost their struggling economy, the People’s Bank of China decided to leave rates unchanged at 3.45% throughout the December Quarter. China is also no longer experiencing deflation. In December, the inflation rate was -0.3%. This fell even further to -0.8% in January. However, in February, consumer prices rose by 0.7% due to robust spending during the Lunar New Year holiday.

 

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