The latest June quarter National Accounts released yesterday showed that without the increase in population, Australia’s economy would have shrunk for two consecutive quarters. This, as Policy Director, Greg Jericho writes in his Guardian Australia column, reveals just how weak our economy is, and how massively households have been hit by the 400 basis points rise in the cash rate.

The Reserve Bank has talked about trying to thread the needle of lowering inflation and delivering a soft landing. But with GDP per capita falling and real household disposable income per capita now 5% below where it was a year ago, it is becoming harder to suggest the RBA has achieved its aim.

Even when including population growth GDP only rose at all because of government spending and investment. The private sector is struggling as companies run down their inventories rather than build up supplies in the hopes of increased sales in the months to come.

The household savings ratio is now as low as it has been since the GFC as households do what they can to pay the costs of essential items and reduce their purchase of discretionary goods and services.

The Reserve Bank sought to dampen demand from a misguided view that demand was driving inflation. Instead, we know that inflation has largely been driven by international prices and costs and from companies taking advantage of the situation to increase their profits.

Rather than focus purely on inflation the RBA and the government now need to be most wary of rises in unemployment. We are not in a recession yet, but should the economy continue to fail to grow aside from population unemployment will inevitably rise, and the cost of the RBA’s strategy will be felt even more so by households across the country.