Combined with a plunge in mining investment and slower stockpiling of business inventories, households were a drag on economic growth. Gross domestic product expanded at a subdued 0.3 per cent and 2.8 through the year.
The overall result is hardly disastrous but not a beautiful set of numbers either.
The Reserve Bank of Australia may be forced to revisit its recent bullish 3.5 per cent growth forecast for calendar 2018. Hopes for a mid-2019 interest rate rise, now look a bit optimistic, barring a jump in wages.
Much of Australia’s economic growth is being driven by government, less so the private sector.
Federal and state spending on healthcare and social services, including the National Disability Insurance Scheme, as well as infrastructure projects, are keeping the economy afloat.
Private business investment intentions are on the improve, but actual non-mining business investment is only gradually picking up, such as in machinery and equipment.
Yet non-mining investment was still not enough to offset the sharp falls in resources capital expenditure as mining and liquefied natural gas projects wind down from construction to less capital-intensive production phases.
The flip side of soft household incomes and consumption being squeezed is that corporate profits and nominal GDP continue to grow solidly.
The profits share of total factor income is at 28.1 per cent – around a record high.
But the missing ingredient is wages growth, in order to avoid a more protracted slowdown in household spending.
Wages and salaries rose 4.3 per cent in the year, largely a result of more jobs being generated. Some sectors are showing signs of improving wages, such as construction and technology.
Low unemployment of 5 per cent and skills shortages in some industries would ordinarily see wages picking up by now.
But recent experience from overseas shows a lack of capacity in the labour market is taking longer to translate to higher pay.
Unless households fall into negative saving, or the more sustainable option of higher wages materialises, a weaker consumer is likely to be a cause for concern approaching 2019.