(June 5): Australia’s economy extended a streak of subdued growth in the first three months of the year as elevated interest rates and cost of living pressures weighed on households.

Gross domestic product (GDP) advanced 0.1% from an upwardly revised 0.3% in the prior quarter and compared with economists’ forecasts of 0.2%, Australian Bureau of Statistics (ABS) data showed on Wednesday. From a year earlier, the economy grew 1.1%, below estimates of 1.2%.

The annual result was the weakest, outside the pandemic, since the first quarter of 1992, when Australia was just emerging from recession, and compares with a decade average of 2.4%. The slowdown will likely increase pressure on the Reserve Bank of Australia (RBA) to begin an easing cycle after it held rates unchanged at 4.35% at its past four meetings.

Governor Michele Bullock reiterated earlier on Wednesday that the RBA remains data-driven and isn’t ruling anything in or out. She predicted GDP would be “low”, adding that household spending in the economy is “very, very weak.”

The Australian dollar was steady around 66.50 US cents, while yields held an earlier decline as money markets finessed expectations the RBA may cut rates this year. Money markets maintained pricing for a roughly one-third chance of an easing by December, according to swaps data compiled by Bloomberg.

The report showed household spending rose 0.4%, while the savings ratio slid to 0.9% from a downwardly revised 1.6%.

Government expenditure added 0.2 percentage point to GDP. The outlook for public demand remains firm, economists said, with extra spending earmarked in the budget expected to flow over coming financial years. There also remains a large pipeline of public infrastructure projects underway.

“Private investment fell by 0.8% driven by a decline of 4.3% in non-dwelling investment,” Katherine Keenan, head of national accounts at the ABS, said in statement. “This was due to a reduction in mining investment as well as a reduction in the number of small to medium building projects under construction.”

Bloomberg Economics expects overall growth to remain subdued, as sluggish consumer spending and weaker residential construction drag on activity.

The RBA predicts annual economic growth will trough at 1.2% in the middle of this year, before regaining momentum. Most economists expect the RBA will begin its easing cycle later this year.