Eating in and staying home: Australian economic growth slows to pandemic levels as consumers cut back

Australian gross domestic product (GDP) grew by 0.2 percent in the December quarter and by 1.5 percent over 2023, according to figures from the Australia Bureau of Statistics (ABS). This is the slowest annual growth rate since the pandemic, driven largely by a fall in household consumption and consumer spending. In per capita terms, GDP actually fell by 1 percent over the year while the population grew by approximately 2.5 percent.

CBA Head of Australian Economics Gareth Aird said “momentum in the economy has ground to a halt”, with consumer spending weakening beyond the Reserve Bank’s (RBA) expectations. “On a per capita basis real consumer spending is down by a very large 2.4% over the year,” Mr Aird said. “Such an outcome would normally be associated with a large negative shock or recession. The weakness in the consumer lies at the heart of the soft GDP outcomes.”

Mr Aird said household consumption declined significantly on a per capita basis in 2023, and the RBA would be surprised by the level of weakness. He noted that in November, the RBA was forecasting annual household consumption to come in at 1.1 percent for 2023. The RBA lowered its forecast to 0.4 percent last month. The actual figure reported by the ABS yesterday is 0.1 percent.

“The RBA’s highly aggressive rate hiking cycle has clearly worked to slow demand growth in the economy,” he said. “Rising mortgage payments along with a lift in tax payable and the effects of elevated inflation have weighed on household purchasing power.”

Mr Aird said the interest paid on housing debt had increased by almost 40% over the past year.

“The ongoing expiry of ultra-low fixed rates will see interest paid continue to grow at a decent clip until the RBA cuts the cash rate. For context, interest paid on housing debt is up by a massive 162% from pandemic lows.”

Lower household consumption is being driven by cuts in discretionary spending because electricity, rent, food and health are costing more. Australians are eating at home more often and spending less on recreation, and fewer people are buying new cars, clothes or footwear.

The December quarter captures the Australian summer holiday period. During the quarter, there was a 9% fall in overseas travel spending as Aussies chose cheaper holidays, preferring destinations closer to home with New Zealand and Indonesia the most popular destinations.

Mr Aird notes the level of new home building in Australia has dropped well below where it was pre-pandemic. There was a 3.8 percent fall in residential property investment during the December quarter due to a major decline in new construction and renovations. “Against a big lift in population growth, the supply and demand mismatch in the housing market has put significant upward pressure on rents,” Mr Aird said. “It has also fed into the increase in home prices over the past year despite the big reduction in borrower capacity due to significantly higher mortgage rates.”

Mr Aird said business investment was “a bright spot” in the economy, up 8.2% over the year. This was largely due to an increase in non-residential and engineering construction over 2023. Katherine Keenan, ABS head of national accounts, said the key drivers of non-dwelling building construction in the December quarter were data centres and warehouses.

There are Corvette fans for whom the base US$68,300 car is plenty powerful enough. After all, it produces 495 horsepower and can reach 60 miles per hour in 2.9 seconds. But hold on, there’s also the approximately US$115,000 Z06—with 670 horsepower and able to reach 60 in 2.6 seconds. These split seconds are important for busy people—and for marketing claims. And if that’s not enough go power, there’s the even more formidable 900-horsepower ZR1 version of the Corvette, starting around US$150,000. The hybrid E-Ray, at US$104,900, is pretty potent, too.

But if they’re still too slow, fans of American-engineered muscle can consider the exclusive Texas-built Hennessey Venom F5, a limited-edition carbon-fibre hypercar. Ten years ago, the Hennessey became the world’s fastest production car, defeating the Bugatti Veyron Super Sport, with a top speed of 270.49 miles per hour.

That world title is much sought after, and is currently held by the Sweden-built 1,600-horsepower Koenigsegg Jesko Absolut, with a two-way average top speed of 277.8 mph. But Hennessey is still very much a contender. The company is hoping the 1,817-horsepower F5 (with 1,192 pound-feet of torque) can exceed 300 mph on the track this year.

The Hennessey Venom F5 coupe is sold out, despite a more than $2 million price tag.
Hennessey photo

Hennessey’s previous Venom GT model (introduced in 2010) was based on the Lotus Exige, with a GM LS-based engine, and was built by partner Delta Motorsport. Spokesman Jon Visscher tells Penta , “The new Venom F5, revealed in 2020, is a 100%bespoke creation—unique to Hennessey and featuring a Hennessey-designed 6.6-litre twin-turbo V8 engine boasting 1,817 horsepower, making it the world’s most powerful combustion-engine production car.” Leaps in performance like this tend to be pricey.

This is a very exclusive automobile, priced around US$2.5 million for the coupe, and US$3 million for the F5 Roadster announced in 2023. Only 30 Roadsters will be built, with a removable carbon-fiber roof. The 24 F5 coupes were spoken for in 2021, but if you really want one you could find a used example—or go topless. In a statement to Penta , company founder and CEO John Hennessey said that while the coupe “is now sold out, a handful of build slots remain for our Roadster and [track-focused] Revolution models.”

Only 24 Revolutions will be built in coupe form, priced at US$2.7 million. There’s also a rarefied roadster version of the Revolution, with just 12 to be built.

The Venom F5 Roadster has a removable carbon-fibre roof.
Hennessey photo

The Venom F5 coupe weighs only 3,000 pounds, and it’s not surprising that insane speeds are possible when combined with a hand-built motor (nicknamed “Fury”) created with power uppermost. The V8 in the F5, installed in a rear mid-engine configuration, has a custom engine block and lightweight forged aluminium pistons, billet-steel crankshaft, and forged-steel connecting rods. Twin turbochargers are featured. The F5 can reach 62 mph in less than three seconds, but top speed seems to be its claim to fame.

The driver shifts the rear-wheel-drive car via a seven-speed, single-clutch transmission with paddle shifters. The interior is not as spartan or as tight as in many other supercars, and is able to handle very tall people. The butterfly doors lift up for access.

“With 22 customer Venom F5 hypercars already delivered to customers around the world, and a newly expanded engineering team, we’re focusing the Venom F5 on delivering on its potential,” Hennessey says. “Breaking 300 mph in two directions is the goal we aim to achieve toward the end of this year to claim the ‘world’s fastest production car’ title.”

Hennessey says the car and team are ready. “Now the search is on for a runway or public road with a sufficiently long straight to allow our 1,817-horsepower, twin-turbo V8 monster to accelerate beyond 300 mph and return to zero safely.” The very competitive Hennessey said the track-focused Revolution version of the F5 set a fastest production car lap around Texas’ 3.41-mile Circuit of the Americas track in March, going almost seven seconds faster than a McLaren P1.

The Revolution features a roof-mounted central air scoop (to deliver cool air to the engine bay), a full-width rear carbon wing, larger front splitter and rear diffuser, tweaked suspension, and engine cooling. It’s got the same powertrain as the standard cars, but is enhanced to stay planted at otherworldly speeds.

Eating in and staying home: Australian economic growth slows to pandemic levels as consumers cut back

Household consumption has slowed as energy, food, rent and health costs increased