Economy heading for recession?; Bitcoin stumbles; SpaceX IPO liftoff
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Welcome to Fear and Greed, business news you can use today. The Australian economy slows as interest rates and fuel costs bite. Electrified vehicles comprised almost 50% of all new vehicles sold last month, and Bitcoin tumbles as global investors head towards US tech stocks. Plus, luxury brands Hermes and Chanel defy the spending downturn in Australia, and Elon Musk's SpaceX ready for IPO liftoff. It is Thursday, the 4th of June, 2026. I'm Michael Thompson, and good morning, Sean Aylmer. Good morning, Michael. Something for everybody today.
What are the current challenges facing the Australian economy?
It's a real mixed bag.
Yes, I mean, they've got space for you, luxury brands for you, Bitcoin for you, electric vehicles for me, interest rates for all of us, something for everyone.
Yeah.
Well, that you gave me luxury brands on the least lux person around. Let's get into it. The main story this morning, the Australian economy slowed sharply in the first three months of the year as the impact of higher interest rates and higher fuel prices slowed consumer spending. In the March quarter, which critically includes four weeks of the Middle East conflict and the initial spike- In petrol prices, the rate of economic growth was just 0.3%, down from 0.9% during the December quarter. The figure was below expectations, and for the full year, growth was 2.5% on a per capita basis. The economy shrunk during the March quarter. The Bureau of Stats figures show, really, consumers are pulling back, particularly when it comes to non-essential items.
The Bureau called it... and I quote, more cautious consumer behaviour.
In contrast, Michael, business investment surged at its fastest pace since the mining boom back in 2012 on the back of the build-out of data centres. Westpac estimates that all the growth in the economy, all the growth, came from investment in data centres. Outside that, investment and economic activity was pretty weak. Productivity fell during the quarter. Bad news there. Now, Federal Treasurer Jim Chalmers noted that growth was driven by the private sector, not the public sector, highlighting what happened in business investment.
Just very briefly, and I know that this is high risk asking you for a quick economics explainer. When we say that productivity fell during the quarter, how does that happen?
Well, in a sense, it's a statistical measure, and productivity says output per unit of input. And strictly speaking, it was the rate of growth of productivity fell. Okay. So I think it was down to point – I don't have it in front of me, but it's down to 0.6% or something or other. So we're still becoming more productive. Right. But – Really, given that we've had a lot of immigration, new people in the economy, stuff like that, our output per unit of input, the growth in that is very, very, very weak.
Okay. All right. The figures, as I mentioned before, the figures measure a time when the February and March interest rate hikes had just been announced. And the US and Israel had just attacked Iran. Does that mean then, considering these are the things that were happening just at the start of that and kind of leading into it, does it mean that the economy could have actually slowed even more since then? Yes, probably.
Now, think of what's happened since then. We've had a third hike in interest rates. And of course, those first two rate hikes in February and March have flowed through the economy. We've had higher petrol, diesel costs. There's been a downturn in the housing market. We've had fallen consumer sentiment. We've had household spending indexes that have slowed, jumping the unemployment rate to 4.5%, monthly inflation figures that suggest maybe a slowing of price increases. So, yeah, it's fair to say the momentum has gone. Now, for the year, it's 2.5%. That's not a bad growth rate, really. But clearly... Everything towards the end of that year period, that three months, things really had slowed down. It is quite possible that the economy is going backwards at the moment, according to Market Economist.
And the official forecast from the Reserve Bank is that the economy will slow to just 1.3% this calendar year, then 1.4% in 2027.
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