Today's National Accounts show that the Australian economy grew strongly in the June quarter, underpinned by a recovery from the natural disasters, solid growth in consumption, and a further pick-up in business investment.
GDP rose 1.2 per cent in the quarter to be 1.4 per cent higher through the year - an impressive result in the context of an uncertain global economy and the patchwork pressures that some sectors are facing at home.
These figures are a clear demonstration of the underlying strength and resilience of our economy which continues to be a stand-out performer despite the worst natural disasters in living memory.
Today's result confirms that the economy has rebounded strongly from last summer's floods and cyclones, with exports starting to recover and inventories being rebuilt. The recovery from these events is estimated to have boosted GDP growth by around ½ a percentage point in the quarter, after detracting over 1 percentage point last quarter.
Exports grew by 2.6 per cent in the quarter, largely driven by the rebound in iron ore exports which have now returned to their pre-flood levels. While coal exports have started to come back on line, flood waters are still affecting some mines which has led to a more protracted recovery.
Imports rose by 4.3 per cent, driven by strong growth in services, intermediate goods, and capital goods imports associated with the surge in business investment.
Household consumption held up well, growing by 1.0 per cent in the quarter and 3.2 per cent through the year, although the pattern of spending was uneven across the economy. The household saving rate remained elevated, consistent with the more cautious approach that consumers have been taking since around the time of the global financial crisis.
Business investment continued to grow strongly in the quarter and further substantial increases are planned. New private business investment rose 1.7 per cent in the quarter to be around 10 per cent higher through the year. This was driven by a further pick-up in new machinery and equipment investment, which rose 3.4 per cent in the quarter to be 13 per cent higher over the year. New engineering construction also increased 2.1 per cent in the quarter to be over 25 per cent higher through the year.
These strong investment outcomes, particularly in the mining sector, contrast with the softness in investment in some other parts of the economy. Non-residential dwelling construction declined by 3.2 per cent in the June quarter to be down over 11 per cent over the year. Dwelling investment was flat in the quarter and was up only slightly over the year.
However, the overall investment picture is very positive. The Australian Bureau of Statistics' Private New Capital Expenditure and Expected Expenditure (CAPEX) report released last week indicates that businesses expect to spend $149 billion on capital expenditure in 2011‑12, up nearly one-quarter from the level of investment last year.
The strong expansion of private investment is occurring as the temporary boost to public investment winds down. Public investment fell 3.8 per cent in the June quarter. The decrease was across all levels of government, consistent with fiscal consolidation plans and the continued withdrawal of the Government's fiscal stimulus measures.
The terms of trade rose 5.4 per cent in the quarter and 12.9 per cent through the year, reaching their highest level since 1950-51.
The strong terms of trade continued to feed through into strong incomes growth. Private non‑financial corporate gross operating surplus rose by over 10 per cent in the quarter, with much of the increase due to a surge in mining profits, which rose 15 per cent in the quarter.
Compensation of employees increased 1.7 per cent in the quarter to be up 7.5 per cent over the year. The increase reflected strong growth in earnings and growth in employment.
Today's National Accounts confirms why we have every reason to be confident in our strong fundamentals and in our linkages to the most dynamic part of the global economy.
And despite renewed global uncertainties and the patchwork pressures facing some of our sectors, this result is another reminder that we have a proven track record of resilience and we confront these challenges from a position of strength.
The Government will continue its strong and steady economic management which has seen the Australian economy emerge as one of the best performers in the developed world.
And we will continue to methodically implement our ambitious reform agenda, so we can keep our economy strong and convert our success into lasting gains for the Australian people.
7 September 2011