The Australian economy is starting to fade as higher interest rates, elevated consumer prices and a slowing global economy make their mark.
Gross domestic product as calculated by the Australian Bureau of Statistics softened to 0.2 per cent quarter growth in the March quarter, down from 0.6 per cent in the three months to December.
The number came in slightly lower than the 0.3 per cent quarterly rise expected by markets and marked the slowest pace of growth since the COVID-19 Delta lockdowns of September 2021.
On an annual basis, the economy grew 2.3 per cent.
Looking under the hood, business investment was a bright spot in an otherwise subdued quarter for economic activity.
But home building and new exports dragged on growth and household spending grew an insipid 0.2 per cent over the quarter. Most of this spending was concentrated on essentials rather than nice-to-haves.
Treasurer Jim Chalmers said the March quarter national accounts confirmed economic momentum was moderating as expected.
"The numbers confirm what Australians already know - that household budgets are under pressure from rising interest rates and higher cost of living," Dr Chalmers said.
The treasurer said the government was focused on providing financial relief without fuelling inflation, repairing broken supply chains and investing in the productive capacity of the economy.
Shadow treasurer Angus Taylor said the government was overseeing an economy that was shuddering to a halt.
"This is a tough time for Australians," he said in Townsville.
"Meanwhile, we have a government that doesn't have the plan or the priorities to fix these problems."
For the Reserve Bank, which hiked interest rates for the 12th time earlier in the week, the labour market and productivity indicators contained in the national accounts were likely of more interest than the headline numbers.
Employee compensation - a broad measure of pay growth capturing things such as bonuses - accelerated to 2.4 per cent over the quarter from two per cent in the quarter prior, to be up 10.8 per cent over 12 months.
Unit labour costs rose two per cent in the March quarter and were up 7.9 per cent annually.
ANZ senior economist Felicity Emmett said while wage costs were moderate, weak productivity growth was boosting unit labour costs.
"Given the close relationship between unit labour costs and services inflation, this will add to the RBA’s concerns about returning inflation to the target band 'within a reasonable time frame'," Ms Emmett said.
She said the national accounts highlighted the "very narrow path" the RBA was navigating to achieve a soft landing.
RBA governor Philip Lowe said on Wednesday Australia was still on course to bring down inflation while keeping the economy growing but the way was littered with risks.
He said more tightening may be needed, depending on how the economic situation unfolds.
Ms Emmett agreed further monetary tightening would likely be needed but households were already clearly feeling the pinch.
"They are moderating their spending quite quickly, now notably in discretionary spending, despite a still large stock of savings," she said.
