Economy grows at 3.3 per cent.
The Australian National Accounts showed that the economy grew by +0.5 per cent in the June quarter and +3.3 per cent over the year to notch up 25 years of consecutive economic growth.
We’re getting pretty close to the world record of 26 years for a developed economy.
Much of the talk over the past year has been that economic growth has been too focused on net exports (true, ay), but this quarter net exports actually subtracted -0.2 percentage points from growth.
The main contributor to growth this time around was government expenditure as the fiscal stimulus bites, fueled by a number of large infrastructure projects such as West Connex and, according to Treasurer ScoMo at least, Hep C drugs and Chinook helicopters!
The residential construction boom is still going like the clappers, but an industry operating at close to full capacity can’t add much more to growth from here on in, even if the building bonanza does remain ongoing for the next couple of years.
Non-residential construction continues to get smoked as mining investment dries up.
Household consumption was weaker in the June quarter, but rose by +2.9 per cent over the year. So-so.
Annual GDP growth of +3.3 per cent was the fastest real rate of expansion since the June 2012 quarter.
Australia’s terms of trade – a measure of the relative prices of exports and imports – lifted by +2.4 per cent in the quarter, with the index reading of 80.5 remaining well above the long term average, but more than a third below the September 2011 peak.
Incredibly, coking coal prices have more than doubled since February, so Australia’s index of commodity prices will likely rise in the third quarter as well.
Ominously, however, the August data from Port Hedland showed that producers are flooding the iron ore market with record supply, which will no doubt see the price of Australia’s most important export commodity taking another turn south over the remainder of the year.
Australia’s real GDP has expanded by 32 per cent over the past 10 years, through a tumultuous decade for most developed countries.
Arguably, however, the most significant point of this release was not the +3.3 per cent in GDP but the rebound in income.
In real terms, after a long pause Real Gross National Income (+2.5 per cent), Real Gross Domestic Income (+2.3 per cent), and Real Net National Disposable Income (+1.9 per cent) all increased over the past year to fresh highs.
You can adjust those figures for population growth as well if you want…same same.
Meanwhile, LNG projects are in the process of ramping up, so in the face of iron ore gloom Aussies should counter-intuitively be hoping for higher oil prices (unless you’re working as a truckie or a travelling sales rep that is).
Testing times for resources states
I want to take look at the household income and expenditure account in more detail in another post, but note here that the household saving ratio (a derived figure) was steady at 8 per cent, with recent interest rate cuts again reducing the mortgage interest burden, a parting gift (or pair of gifts) for net borrowers from Captain Glenn.
Total compensation of employees increased by +3.1 per cent over the year, by and large in line with what we already know in respect of weak annual wage price growth (+2.1 per cent) and hours worked (+0.7 per cent).
The state level figures show how tough the adjustment to a post-mining-boom world is in Western Australia right now, with final demand sagging -2.5 per cent lower over the quarter and -7.4 per cent lower over the year.
At least mining construction will stop falling soon!
An undeniably solid headline result, with government expenditure stepping in to plug the holes.
Australia still has some tricky water to negotiate before the resources investment stops falling though, including downside risks to iron ore and looming settlement risks on a couple of hundred thousand new apartments before the end of 2018.
Still, for now that’s another year ticked off with no recession making it 25 on the bounce, which is something to be happy about.