Already a subscriber?Investment by businesses is not keeping pace with the growing workforce, the Productivity Commission has warned, as new data shows spending on equipment edged lower in December, cementing expectations of weak GDP growth.
The figures cement expectations that the December quarter national accounts, to be released next Wednesday, will be soft. Economists surveyed by Bloomberg expect the economy grew by just 0.2 per cent in the final three months of 2023, and by 1.4 per cent in annual terms. Soft investment figures have become a major concern for the Productivity Commission, which warned in its annual productivity bulletin on Friday that investment spending was not keeping pace with the growing workforce.was due to an “unprecedented” 6.9 per cent increase in total hours worked, which was not met by an equivalent increase in economic activity.
Labour productivity fell in 11 of the 16 market sector industries, with more than half the 3.7 per cent decline in aggregate due to falls in the wholesale trade and hospitality industries. “Despite this uptick in decoupling, the underlying connection between labour productivity and wages remains intact, emphasising the importance of improving labour productivity to support a rebound in real wage growth,” the commission said.Falling real wages have weighed on household spending. Retail spending grew by just 1.1 per cent in the 12 months to January 2024, the ABS said on Thursday.
Combined with the gradual increase in the unemployment rate, KPMG chief economist Brendan Rynne said the sluggish retail figures provided further evidence that household demand was weakening.