Australia is seeing a clear per capita GDP decline. 

Australia experienced a sluggish economic growth of only 0.2 per cent in the third quarter, falling short of the expected 0.4 per cent, according to data from the Australian Bureau of Statistics (ABS). 

The annual growth stood at 2.1 per cent, below the anticipated 1.8 per cent, based on a Refinitiv survey.

However, the per capita performance revealed a more concerning trend, with a contraction of 0.5 per cent in the September quarter and a 0.3 per cent decline over the past year. 

The slowdown was attributed to a variety of factors, including higher mortgage interest rates impacting consumer spending.

Households faced challenges as the removal of the Low and Middle Income Tax Offset led to increased income tax bills, contributing to a decline in the household saving ratio to a 16-year low of 1.1 per cent. 

ABS Head of National Accounts, Katherine Keenan, highlighted the impact, saying; “Increased interest paid on home loans and inflationary pressure on households were also likely factors behind the fall in the household savings ratio.”

Economists observed a significant jump of 27.9 per cent in income payable by households over the past year, driven by surging mortgage repayments and rising income tax bills, marking the largest increase since September 1977.

The economic slowdown, particularly in consumer spending, was evident, prompting Westpac senior economist Andrew Hanlan to note that the Australian economy “almost came to a standstill in the September quarter”.

Despite concerns, there were some optimistic viewpoints. JP Morgan's Ben Jarman suggested that the annual GDP growth rate aligns with RBA forecasts, and improvements could be expected with upcoming tax breaks for higher-income households.

The contribution of government spending played a pivotal role in preventing a contraction, adding 0.2 percentage points to the quarterly growth number. 

The economy's reliance on population growth and government spending, coupled with a decline in mining exports and weakened household spending, has shifted market expectations from further rate hikes to potential rate cuts, with a 50 per cent chance of a 25-basis-point cut by June next year.

The broader economic impact was evident in the decline of household living standards, with real disposable income per capita now at 2014 levels. 

Analysts emphasise the need for strategic policy decisions to address the issues affecting household spending and overall economic growth.