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Australia's economy grew by 0.1 per cent over the first three months of 2024 and 1.1 per cent over the year, according to the Australian Bureau of Statistics (ABS) national accounts.
Treasurer Jim Chalmers said it wasn't a surprise to see the economy barely growing, but Australia was still doing better than many comparable countries.
"The primary cause of this very weak growth was higher interest rates, combined with moderating but persistent inflation and ongoing global uncertainty," he said.
"But any growth is welcome in the domestic and global circumstances we confront.
"Over the past year, around three quarters of OECD economies have recorded a negative quarter while Australia has avoided one to date.
"Australia recorded faster annual growth than most major advanced economies – faster than Canada, Italy, the United Kingdom, Japan and Germany," he said.
But Katherine Keenan, ABS head of national accounts, said the national economy had now experienced "its lowest through-the-year growth since December 2020".
She said economic activity per person had also fallen for the fifth-consecutive quarter, dropping 0.4 per cent in the March quarter and 1.3 per cent through the year.
Australia 'teetering' on edge of recession
Callam Pickering, APAC economist at global job site Indeed, said Australia's strong population growth was helping to stave off a recession.
He says the clear weakness in household spending has been more than offset by the formation of new households, via immigration.
"For the fifth consecutive quarter, economic activity declined on a per capita basis and the 1.3 per cent decline over the past year is the largest Australia has experienced in 33 years, excluding the pandemic," he said.
"Population growth is the only thing standing between Australia and recession," he said.
He said the household sector remained "a considerable risk" to Australia’s economic outlook.
"Even a small deterioration in labour market conditions, a reduction in population growth or even a reluctance to dip into savings could quickly pull the rug out from household spending, leaving the broader economy in a precarious position," he said.
"The latest economic growth figures provide yet more evidence that Australia is experiencing a significant economic slowdown.
"We've been teetering on the brink of recession," he said.
The household saving rate fell from 1.6 per cent to 0.9 per cent in the March quarter as household consumption, dealing with rising prices, outpaced growth in households' disposable income.
ABS officials say nominal household final consumption expenditure (+1.5 per cent) detracted from household saving as prices for essential and discretionary services continued to rise.
"Household savings is hovering around levels we haven't seen for 15 years," Mr Pickering said.
Dwelling investment remains a serious problem, construction the 'weakest link'
Data show dwelling investment declined by 0.5 per cent in the March quarter, due to a decline in new construction (-0.6 per cent) and in alterations and additions (-0.5 per cent).
Economists say the level of new home building was well below its pre-pandemic levels and it's contributing to severe stresses in housing and rental markets.
"Against a big lift in population growth, the supply and demand mismatch in the housing market has put significant upward pressure on rents," Commonwealth Bank economist Gareth 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.
"Restrictive monetary policy is weighing on new residential construction. In turn this is leading to ongoing distortions in the rental market," he said.
Mr Aird said "the prices side" of the housing market was concerning from a societal perspective as property price growth continued to "materially outstrip" growth in wages.
"On conventional affordability metrics most housing markets around the country are their least affordable in history," Mr Aird warned.
"Policymakers should be concerned about the societal implications around the current state of Australia's housing market. There is a widening divide between the 'haves and the have nots'."
Denita Wawn, the chief executive of Master Builders Australia, said construction was the economy's "weakest link" in the March quarter, after it declined by 2.6 per cent.
"The decrease was driven by a 2.3 per cent fall in construction services, a 3.1 per cent fall in building construction and a 2.6 per cent fall in heavy and civil engineering construction," she said.
Ms Wawn said in 2023, construction was one of the main drivers of economic growth, but today's "sobering figures" reflected a continuous decline in building approvals across all sectors of the industry.
"This comes at a time when an increasing supply of housing is needed to bring down inflation in the rental market," she warned.
"The drastic lengthening in build times for new homes and an increase of costs by 40 per cent since pre-COVID is making it extremely difficult to get projects off the ground."
Where are the bright spots?
But Sean Langcake, the head of macroeconomic forecasting for Oxford Economics Australia, said it wasn't all negative news.
He said household income growth still remained healthy in the March quarter, even if it had "stepped down" in recent quarters as the labour market had cooled.
Data show compensation of employees rose by 1 per cent in the March quarter, which, although it was the slowest rate of growth since the September quarter 2021, was still higher than in the quarters leading up to the 2020 pandemic.
Mr Langcake said, despite the lacklustre economic activity in the March quarter, he felt things could start improving in the next six months.
"We think economic momentum is likely at its nadir, and expect an improvement in conditions over the second half of the year as tax cuts boost consumer spending," he said.
"However, growth is likely to remain below trend through 2024."
ANZ economist Blair Chapman said there was usually a surprise or two in the national accounts, and one surprise in this data was the 0.4 per cent increase in household consumption in the March quarter, and the upward revision to the December quarter household consumption figures.
"Household spending, while still weak, isn't quite as weak as we'd expected," Mr Chapman wrote in a note.
"Overall, we see little in this release that would change our view on the Reserve Bank or the general outlook for the economy.
"The pace of GDP growth over the past six months is a little weaker than we anticipated, but labour market conditions have only eased slowly over the same period while recent inflation data have shown some stickiness."
Westpac economists Matthew Hassan and Pat Bustamante said household spending had been more resilient than estimated, but households now had "smaller buffers" to support their spending in the months ahead.
They said the decline in the household saving rate to 0.9 per cent was notable.
"[It] implies a more material run down of extra savings accumulated during the pandemic," they said.
"About 45 per cent of the estimated $255 billion reserve now looks to have been spent. Previous estimates had suggested only 23 per cent of the reserve had been spent as at December."