The federal budget is improving but the national economy is struggling,putting more pressure on Treasurer Jim Chalmers.

The federal budget is improving but the national economy is struggling,putting more pressure on Treasurer Jim Chalmers.Credit:Alex Ellinghausen

Over the past three months,three things – government spending,immigration and the inability of miners to move their product – helped the economy expand.

Households,which account for about two in every three dollars of economic activity,watched as their spending power was snatched away by the Reserve Bank and governments.

The impact of the cost-of-living crisis is apparent.

Compensation of employees,which accounts for wages and the number of people in the workforce,increased solidly through the quarter. But household spending was flat – up just $84 million – while the household savings ratio fell to a near 16-year low.

The savings ratio is still positive,but it hasn’t been this low since Australians were using their increasingly expensive homes as credit cards just ahead of the global financial crisis.

Real household disposable income fell for a ninth consecutive quarter to be 6.6 per cent lower over the past 12 months.

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So steep has the fall been that household disposable income is back to where it was almost eight years ago. Most of us had just watched the fifth season ofGame of Thrones and were wondering if Jon Snow was really dead.

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Snow returned,but Australian households may not.

The tax take is soaring,accounting collectively for about $1 in every $8 of income. The end of the low- and middle-income tax offset – a policy that should never have been extended by the Morrison government – is now biting hard on those least able to afford it.

And the Reserve Bank is there,capturing $1 in every $20 of household income through higher interest rates. Of course,that is highly concentrated on those unlucky enough to have a mortgage at present.

The statistics suggest the bank has misjudged justhow the economy is dealingwith the combination of high taxes,inflation and high interest rates.

It was just a fortnight ago that Governor Michele Bullock was telling fellow central bankers in Hong Kong that Australian households and businesses were “actually in a pretty good position”.

RBA governor Michele Bullock told a conference in Hong Kong a fortnight ago Australian households were holding up pretty well. The national accounts suggest otherwise.

RBA governor Michele Bullock told a conference in Hong Kong a fortnight ago Australian households were holding up pretty well. The national accounts suggest otherwise.Credit:Bloomberg

The complaints coming from those same households and businesses were simply “political noise”. Yet the national accounts show the noise was the sucking of cash out of the pockets of Australians at a near-unparalleled rate.

This quarter actually pre-datesthe RBA’s November decision to lift the cash rate to a 12-year high of 4.35 per cent. In other words,the Reserve Bank tightened monetary policy months after consumers had been flattened by previous rate rises and the end of the low- and middle-income tax offset.

If it weren’t for immigration,which is putting extreme pressure on other parts of the economy,the economy would have contracted through the September quarter.

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The only saving grace for Australia isthe low unemployment rate which has been under 4 per cent for the best part of 18 months. But it would only take a small increase in the jobless rate or a slowdown in immigration (of which there are some early signs),and the whole deck of cards would come tumbling down.

Enjoy a hot Australian Christmas because if the trends in national accounts continue,then an economic winter is coming.

Cut through the noise of federal politics with news,views and expert analysis from Jacqueline Maley. Subscribers can sign up to our weekly Inside Politics newsletterhere.

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