National Accounts, March Quarter 2019

Today’s National Accounts show that the Australian economy grew by 0.4 per cent in the March quarter to be 1.8 per cent higher through the year. This is within the range of market expectations.

The economy continues to grow in the face of international and domestic headwinds, however, growth is softer than it was at the same time last year.

In terms of real GDP, net exports, public final demand, household consumption and new business investment all contributed to real GDP growth during the quarter.

Nominal GDP continues to be strong, growing by 1.4 per cent in the quarter and 4.9 per cent through the year, driven in part by a rise in the terms of trade and strong commodity prices.

The terms of trade were up 3.1 per cent in the quarter, and 6.0 per cent through the year.

Household consumption, which comprises just under 60 per cent of GDP, grew by 0.3 per cent in the March quarter, with consumption increasing in 11 of the 17 consumption categories.

New public final demand, across all levels of Government, rose by 0.7 per cent in the quarter to be 5.5 per cent higher through the year. This reflects the continued provision of essential services that Australians rely on, including the National Disability Insurance Scheme, as well as large scale infrastructure projects that are being rolled-out across the country.

Net exports contributed 0.2 percentage points to real GDP growth in the quarter. This was driven by an increase in exports which rose by 1.0 per cent and a small decline in imports of 0.1 per cent.

Services exports increased by 2.0 per cent in the quarter to be 6.6 per cent higher through the year. More generally growth in services industries across the economy increased by 0.9 per cent for the quarter, contributing 0.6 percentage points to GDP growth. The ongoing transition to services is important as these industries tend to be more labour intensive and therefore a key driver of jobs growth which has been robust in recent years.

The drought continues to impact growth with farm GDP 6.8 per cent lower than this time last year. Crop production fell in the quarter as ongoing drought conditions in the eastern states continue to have an impact. Farmers also continued to reduce livestock numbers, in part reflecting the drought and high feed costs.

New private business investment increased by 0.6 per cent in the quarter, driven by investment in non-residential building construction. However, new business investment is down 1.3 per cent through the year, largely reflecting the continued transition of the mining sector from the investment phase to the production phase. This transition is nearing completion as the last of the major LNG projects come on line.

Dwelling investment fell by 2.5 per cent in the quarter, the second consecutive quarterly fall since the record levels reached in September 2018.

Compensation of employees (COE), which measures the national wage and salary bill, increased by 1.2 per cent in the March quarter to be 4.3 per cent higher through the year.

Employment growth continues to be robust with more than 320,000 jobs created over the past year, with around eight out of every 10 new jobs being full-time.

The strong labour market has drawn more people into work, particularly women and seniors. The participation rate, at 65.8 per cent, is now at a record high.

The fundamentals of the Australian economy remain sound. The labour market is strong with more than 320,000 jobs created in the last year and the participation rate at a record high. The proportion of people of working age on welfare is at a 30 year low. Australia has maintained our AAA credit rating and we are in our 28th consecutive year of economic growth.

However, the economy does face international and domestic challenges. The personal income tax cuts announced in the Budget along with yesterday’s decision by the RBA to cut interest rates, will provide a timely boost to household disposable income. Our record $100 billion infrastructure spending program, our plan for up to 80,000 new apprenticeships, together with the increase and expansion of the instant asset write-off to businesses with a turnover of up to $50 million will also enhance economic activity as part of the Morrison Government’s pro-growth economic plan.

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