Today's National Accounts show that the Australian economy continued to grow in the September quarter against a backdrop of still challenging global conditions.
GDP rose by 0.2 per cent in the September quarter to be 0.5 per cent higher through the year.
Today's outcome is a cautionary reminder that growth momentum in the Australian economy is not yet self-sustaining, with businesses and households still facing ongoing impacts from the global recession.
Once again the Government's economic stimulus was vital in supporting the economy, offsetting the continued weakness in private sector demand. Treasury estimates that fiscal stimulus added 0.4 of a percentage point to GDP growth in the September quarter. Without the stimulus the economy would have contracted in the September quarter by about 0.2 per cent.
Without the Government's stimulus measures, the Australian economy would have contracted in each of the past four quarters, shrinking by 2 per cent over the past year. Instead, with the help of fiscal and monetary stimulus, Australia has continued to outperform and outgrow nearly all other advanced economies. Among the world's advanced economies, Australia is one of only three economies to have grown in the year to the September quarter.
Household consumption spending strengthened in the quarter, rising by 0.7 per cent, with growth underpinned by solid levels of consumer confidence, the continued resilience of the labour market, and the continuing effects of the Government's cash stimulus payments earlier in the year.
Dwelling investment rose for the first time in a year, reflecting the effects of historically low interest rates and support from the Government's First Home Owners Boost and the Energy Efficient Homes Package. These measures have been driving strong finance and approvals data in recent months, and are now being reflected in construction work.
Private business investment fell in the quarter, but there were substantial differences among the components. Machinery and equipment investment fell by 2.9 per cent, following the bring‑forward of investment in the June quarter from the Small Business and General Business Tax Break. Non‑residential building investment slumped a further 6.0 per cent, following sharp falls over the past year. The fall would have been larger if not for the growth in school investment associated with the Building the Education Revolution program. Engineering construction investment also declined, but remains at a high level, following strong growth over the past couple of years.
A positive sign is the strong contribution from inventories in the September quarter as businesses began restocking in anticipation of stronger demand. Imports also rose strongly in the quarter, consistent with the increase in inventories.
Public investment increased strongly in the quarter, helping to offset the weakness in private investment and providing a timely fillip to demand as the investment phase of the Government's stimulus gathered momentum. Public investment rose by 6.2 per cent in the quarter, with much of the increase coming from the stimulus. Public investment contributed 0.3 percentage points to growth in the quarter.
Export volumes fell by 2.3 per cent in the quarter, but prospects remain positive as global growth recovers. The fall reflected lower base metal exports, in addition to falls in exports of mineral fuels and gold – goods which are typically volatile. The terms of trade stabilised after sharp falls over the past three quarters.
Nominal GDP rose by 0.2 per cent in the quarter, after falling in the previous three quarters. Business profits fell further in the quarter and have contracted by 16.3 per cent through the year, the second weakest growth in the history of the National Accounts. Wages and salaries rose marginally in the quarter and grew by only 0.3 per cent through the year, the weakest through the year growth since the September quarter 1991.
While economic conditions are clearly improving, today's National Accounts show that Australia's economic recovery still has a way to go. The stimulus continues to provide crucial support and the gradual phased withdrawal that is already underway remains appropriate as the global recession washes through the Australian economy.
16 December 2009