- Commonwealth Bank concerned about weak economy
The Commonwealth Bank has issued a warning about the economy growing at only half the pace of population growth.
Outside of a pandemic, Australia’s economy is already growing at the slowest pace since the 1991 recession, as workplace production continues to retreat.
Things are unlikely to improve any time soon, with Commonwealth Bank Australian economics chief Gareth Aird predicting the economy grew just 1.1 per cent in the year to September.
Australia’s largest bank said economic growth would be “well below the rate of population growth” at a rate of 2.3 percent, showing that a large influx of foreigners is contributing little to the growth of the economy.
Successive Australian governments over the past two decades have relied on accelerated immigration to boost job creation.
But Australia’s economy has also been in a per capita recession since the March 2023 quarter, where each Australian’s output has been shrinking.
“Despite strong population growth, national accounts are expected to confirm that the per capita recession continues,” Mr Aird said.
Productivity is declining and economic activity is weak despite a large influx of skilled immigrants and international students.
The Commonwealth Bank has issued a warning about the economy growing at only half the rate of population growth (pictured, a Sydney branch)
“The result is that productivity growth is expected to be poor again,” he said.
In the year until September, 449,060 net migrants moved to Australia.
This is significantly higher than the government’s forecast of 260,000 for the 2024-25 financial year made in the May Budget.
But population growth is not translating into stronger economic activity following the most aggressive interest rate increases in a generation.
This is because high immigration has led to house prices becoming unaffordable, with Sydney’s median approaching $1.5 million.
Productivity is declining and economic activity is weak, despite a large influx of skilled immigrants and international students (file image of university graduates)
This means larger mortgages and borrowers with variable rates who are more likely to run into financial difficulties with each increase in interest rates.
“Indeed, real household disposable income per capita has been hit harder in Australia than any comparable economy over the past three years,” the Commonwealth Bank said.
Australia still has an inflation problem: services inflation soared 4.6 per cent in the year to September, and strong population growth continues to push up rents.
Commonwealth Bank economists are raising concerns about slow growth in Australia’s economy just nine months after chief executive Matt Comyn told shareholders high immigration was good for profits.
Prime Minister Anthony Albanese and his ministers have promised to reduce immigration by bringing in fewer international students.
“Without a doubt, strong population growth and growing migration are a huge tailwind for the Australian economy and clearly the Commonwealth Bank is a beneficiary of further economic growth,” he said.
Prime Minister Anthony Albanese and his ministers have promised to reduce immigration by bringing in fewer international students.
But the Coalition is set to defeat Education Minister Jason Clare’s plan to cap student numbers at 270,000 by 2025.
The Australian Bureau of Statistics will release national accounts data for the September quarter on Wednesday next week.