Australia’s lethargic economy is being weighed down by continuing poor productivity, with no plan on the horizon to reverse the trend.

National accounts data released today by the Australian Bureau of Statistics shows gross domestic product (GDP) growth almost crawling to a halt, at just 0.2 per cent in the December 2023 quarter, following growth of 0.3 per cent in the September quarter. Overall, the economy has grown 1.5 per cent for the year.

“Australia desperately needs to turn around this trend of productivity decline. In the short term, we must avoid a recession and the devastating impact that would have on businesses and households,” ACCI chief executive officer Andrew McKellar said.

Recent analysis by the Productivity Commission shows productivity contracted 3.7 per cent in 2022-23.

“As the government’s industrial relations legislation starts to roll out at ground level, the negative impacts will manifest themselves in slower growth and productivity,” Mr McKellar said.

The deteriorating economic situation continues to be masked by strong population growth. GDP per capita has declined for three consecutive quarters, a clear indication that conditions are moving in the wrong direction.

Cost of living pressures, from high inflation and declining real income, have weighed heavily on consumers over the past year, with household spending inching up 0.1 per cent for the quarter.

The rising cost of doing business is also overwhelming. Under the weight of sharply rising materials and labour costs, business margins are being squeezed, with the gross operating surplus of private corporations down 3.9 per cent during 2023.

Government measures not linked to productivity have contributed to compensation of employees rising by 8.4 per cent in the year to December, putting upward pressure on prices. Recent Treasury analysis shows that high wage growth made up almost two-thirds of headline inflation in 2022-23.

These pressures are also suppressing business investment, with investment in machinery and equipment down 1.3 per cent for the quarter. This has continued to deteriorate since the end of the temporary full expensing measure in June.

“Greater attention needs to be paid to driving business investment, essential to restoring productivity growth and reigniting the economy,” Mr McKellar said.