In seasonally adjusted terms, GDP grew 0.5% over the June quarter, pulling down the annual growth rate to 1.4% from 1.8% – the slowest annual pace recorded since the GFC.

You would have to go back before the year 2000 when GST was introduced to find a weaker figure.

A breakdown of the expenditure measure of the GDP shows government spending drove the economy, adding 0.5% to the result. Household consumption, which has struggled off the back of weak income growth only added 0.2% to the result.

In a sign households may be dipping into their savings to make ends meet, the household saving ratio fell to 2.3%, down from 2.5% in the March quarter.

This ratio reflects how much Australians are saving from their net disposable income.

There has also been a drop in new car sales, with new figures out today showing new car sales plunging by 10.1% in August.

Rate cuts may help

While the result was in line with economists expectations, it fell short of the Reserve Bank’s forecast of 1.7%, which may impact the next rate decision.

On Tuesday, the RBA held the official cash rate at 1.00%, saying it was reasonable to “expect that an extended period of low-interest rates is required” to boost the economy.

Westpac chief economist, Bill Evans said the result strengthens the case for another rate cut.

“The result also puts the 2019 and 2020 growth forecasts at risk. To achieve the RBA’s forecast of 2.5% growth for 2019 the second half of 2019 will need to register a growth of 1.6% (more than 3.0% annualised). That now seems out of reach and makes the assumption of a “leap” to 2.75% in 2020 even more heroic.

“These results therefore further strengthen the case for a rate cut in the very near term. Recall that the RBA’s August forecast of 2.5% growth in 2019 already assumed rate cuts in both 2019 H2 and 2020 H1.”

Westpac senior economist, Andrew Hanlan said the economy has lost considerable momentum since mid-2018, led mostly by the downturn of the housing sector and by the consumer.

“These are challenging times. The Australian economy is navigating a period of cyclical weakness, centred on construction, particularly housing after a tightening of lending standards.

“There are powerful structural headwinds from weak wages growth and productivity, constraining consumer spending. The global economy is slowing and downside risks have intensified as the global trade and technology war escalates, denting business confidence and business investment plans.

“Looking ahead, recent policy stimulus (tax cuts and interest rate cuts) will provide a boost to activity – but given the weak starting point and the powerful headwinds – the risk is that growth remains below trend over the remainder of 2019 and through 2020.”

Treasurer Josh Frydenberg has downplayed the weak result, saying it does not reflect the tax refunds or lower interest rates.

“The fundamentals of the Australian economy are strong. We have maintained our AAA credit rating.”