The share of household income going on mortgage repayments and taxes has reached its highest level in almost 50 years, amplifying the crunch on family budgets from surging living costs. Household interest and income tax payments both jumped 7.6 per cent in the September quarter to be almost 28 per cent greater than a year earlier, the biggest such increase since 1977, according to the Australian Bureau of Statistics. The result was contained in the latest national accounts, which showed economic growth in the September quarter was much weaker than expected, expanding by just 0.2 per cent. The reading shows the economy was slowing significantly even before the latest rate hike and has called into question the need for any further monetary policy tightening. Contributing to the slowdown was a deepening downturn in household consumption, which did not increase in the quarter despite strong population growth and a 2.6 per cent lift in payments to workers. It has risen just 0.4 per cent in a year, the softest annual reading since the impact of pandemic-related lockdowns in early 2021. A fall in the value of exports also dragged on the economy. They declined 0.7 per cent, the first such drop since March last year. The weakness in spending highlights the intense financial pressure being felt by millions of families. In addition to much higher interest payments and increased tax contributions (which were driven by higher incomes and strong employment growth), households have had to grapple with rising living costs, which jumped 5.4 per cent last quarter. Showing just how close to the bone many family budgets have become, the household savings ratio has slumped to 1.1 per cent, its lowest mark in 16 years. Treasurer Jim Chalmers said the figures showed the "acute pressure" on families from rising living costs and higher intertest rates. "We know people are doing it very tough because of higher interest rates and international uncertainty," Dr Chalmers said. "Household consumption was flat in the quarter with Australians having to make room for mortgage interest payments, which reached nearly $30 billion in the quarter. People are stretching their incomes further." The Treasurer said the economic slowdown had been expected and updated forecasts will be included in the Mid-Year Economic and Fiscal Outlook due out next week. Despite the downturn in activity, Dr Chalmers assured that "welcome and encouraging progress" was being made, including a continued moderation in inflation, sustained jobs growth, higher wages and improved government finances. The national accounts also showed a modest 0.9 improvement in productivity, which the Treasurer cautiously welcomed. "This is a welcome uptick in productivity but we're not getting carried away by one quarter's numbers. This productivity challenge is an entrenched one," he said. But opposition treasury spokesman Angus Taylor said the data showed that "middle Australia is being absolutely crushed". Households were, "digging deep into their savings, they're working more hours and more jobs, and they're cutting back on the basics like fresh food," Mr Taylor said. "This is the exact opposite of what we want to see." There is evidence that the slowdown in the economy in the September quarter has extended and deepened since. The Ai Group's industry index, which tracks activity and other key performance measures, fell 12.5 point to negative 22.4 points in November, the weakest reading since mid-2020. The result indicates that conditions across industry are "strongly contractionary", particularly in sectors most directly exposed to consumers, including food and clothes manufacturing and residential construction. Ai Group chief executive Innes Willox said the hit to household spending from high inflation and interest rates was driving particularly steep declines in demand and sales for "consumer facing" businesses. In a promising sign for the fight to bring inflation down, the Ai Group report showed only a modest 2.1 per cent increase in industry input costs, while indices measuring selling prices and wages declined. A 12.6 point fall in the new orders index indicates the period of weakness is set to continue. KPMG chief economist Brendan Rynne said the GDP numbers justified the Reserve Bank of Australia's decision to hold interest rates steady in December and cast doubt on the need for more hikes. Dr Rynne said the data confirmed that high interest rates were working to slow the economy and the latest growth data "must question whether further rate rises are needed".