GDP figures spark further push for tax reform
GDP per capita has fallen for the seventh straight quarter, highlighting the need for tax reform and better utilisation of labour supply, says BDO.
Australian gross domestic product (GDP) rose 0.3 per cent in the September quarter of 2024 and by 0.8 per cent since September 2023, according to recent figures by the Australian Bureau of Statistics.
ABS head of national accounts Katherine Keenan said the Australian economy grew for the twelfth quarter in a row but that growth has slowed since September 2023.
The strength this quarter was driven by public sector expenditure with government consumption and public investment both contributing to growth.
The figures also indicated that on a per capita basis, GDP actually fell by 0.3 per cent, falling for the seventh straight quarter.
BDO Economics partner Anders Magnusson said while the figures indicate that the Australian economy is growing, it doesn’t feel like it to most Australians.
The Australian economy has grown for the twelfth straight quarter, while GDP per capita has declined for the seventh quarter, said Magnusson.
“Life will get a little easier for the average Australian when the RBA reduces the cash rate next year, but that will only provide short-term relief without productivity improvements,” he said.
“Addressing the GDP per capita recession hinges on improving output per hour worked. The solution is not lowering the cash rate to ease mortgage pressures, but tackling the productivity puzzle head-on, such as through tax reform and better utilisation of existing labour supply.”
Speaking at a CPA Australia event yesterday, Independent Member for Wentworth Allegra Spender also outlined the importance of increasing productivity as a way of boosting prosperity for younger Australians.
Spender said in order to increase productivity Australia would need to make major reforms to its tax system.
“I’m worried that young people can’t build the lives that they wanted, that we’ve got low productivity and that the climate transition is going to cost us more than it should because our tax system isn’t working,” said Spender.
Spender said the cost-of-living crisis was equally symptom of the broader challenges of Australia’s systems, including its tax system.
“Clearly tax reform is just part of the broader agenda that Australia needs in terms of economic reform, but I believe, it is an important one,” said Spender.
Magnusson said growth in the September quarter stems from public demand and an increasing population, despite softening terms of trade linked to education-driven travel services and declines in iron ore and coal prices.
"While the RBA anticipates a boost in household spending due to real income rises — evident in rising retail sales — the household savings ratio remains low but shows signs of recovering," he said.
"This reflects ongoing cost-of-living struggles. Households aren’t poised for a spending surge that could spur inflation."
Simultaneously, the rising unemployment rate aligns with RBA forecasts, said Magnusson.
"Unit labour costs have increased over the last two quarters, signalling that the labour market is still tight and easing towards full employment," he said.
"I expect the RBA to continue its commitment to caution as underlying inflation returns to the 2-3 per cent target range before the first cash rate cut, especially amidst rising geopolitical tensions."
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