The Morrison government has pledged to reduce the migration rate but figures released on Wednesday show that without migrants fuelling consumption, Australia's economic growth would be going backwards. The Australian Bureau of Statistics data shows the economy grew by 2.3 per cent over the year and 0.2 per cent in the December quarter - below market expectations and well short of Reserve Bank forecasts of 0.6 per cent. Treasurer Josh Frydenberg. Credit:AAP The budget forecast of 3 per cent growth for 2018-19 and the mid-year economic update's revision to 2.75 per cent will struggle to be met, putting a strain on preparations less than a month out from Treasurer Josh Frydenberg's first budget. Despite the real GDP slump, nominal growth, the amount of money that is likely to pump into the budget, is up by 5.5 per cent over the year, giving the government scope to hand out tax cuts to strained households.

Economic growth per person fell by 0.1 per cent in September and 0.2 per cent in December, the first time two consecutive quarters, the technical definition of a per capita recession, have recorded negative growth since 2006. The dissapointing result was buffered by the Bureau's preferred measure of living standards, real net national disposable income per capita, moving along at trend - up by 1.4 per cent over the year. Mr Frydenberg said the figures showed the "economy is in fundamentally good shape" but the yearly figure "did represent some moderation on the back of strong results." "The unemployment rate has fallen to 5 per cent, the lowest level in seven years and to a remarkable 3.9 per cent in our largest state, NSW, a level that hasn't been seen since the 1970s," he said. "The fact that we are growing at a faster rate than any other G7 economy apart from the US is testament to that."

Mr Frydenberg said the drought, lower mining investment and a decline in residential construction activity were to blame for the lower than expected result. Shadow treasurer Chris Bowen said the government "has lost the moral authority to

campaign and talk about the economy". "Per head of population, the Australian economy has gone backwards. This is the first time this has happened since 2006. It's the only the third time it has happened since 1991," he said. ABS chief economist Bruce Hockman said growth in the economy was subdued, reflecting soft household spending and a decline in housing investment. Shadow Treasurer Chris Bowen. Credit:Alex Ellinghausen

Government spending was the economy's major driver, with public investment remaining at high levels particularly through large infrastructure projects funded by the NSW and Victorian governments, along with federal spending on aged care and the National Disability Insurance Scheme. But households remain reluctant to spend as falling house prices affecting the amount consumers are willing to part with. Loading Most of the spending that did occur was driven by rises in health, up 1.9 per cent, and clothing and footwear, up 2.2 per cent. National Australia Bank economist Kaixin Owyong said the data makes the Reserve's forecast of 3 per cent growth over 2019 look increasingly unlikely, as growth would need to accelerate markedly.

"We believe the Bank will be increasingly uncomfortable with the 'growing tension between strong labour market data and softer GDP data'," he said. He said should employment progress falter over the next few months, the Reserve will be forced to cut rates. JP Morgan and Nomura now expect the RBA to cut rates by 25 basis points in July, followed by a further easing in August.