Hooray! The Australian economy notched up its 99th consecutive quarter since our last recession – no mean feat!
And this was a strong headline result, with the economy growing by +1.1 per cent over the March quarter and a pretty impressive 3.1 per cent over the year.
When looking at the composition of growth, it’s clear that net exports accounted for…well, an awful lot of the growth this quarter, although household consumption has done decently enough.
This is a pattern that may repeat over the next 12-18 months, as LNG exports begin to ramp up in volume, if not in price.
This in part explains low demand and inflation in the economy, despite a headline growth figure of now greater than 3 per cent.
The terms of trade continue to get walloped. Until recently the index remained above any pre-mining boom level seen since the ABS records began in the early 1960s…but no longer!
The retracement continues.
The state final demand (SFD) figures, a measure which exclude exports, depict just how intensely the resources regions are feeling the collapse of mining construction, particularly in Western Australia where SFD is down by 4.2 per cent over the year to March.
The WA Real Estate Institute (REIWA) puts the Perth vacancy rate at 6 per cent, suggesting that the touted property market recovery is still some way off yet, despite improved affordability.
Total interest repayments for existing homeowners, which you would normally expect to increase over time as the population increases and house prices rise, remain very low indeed.
There was a small uptick in the March quarter, in part a result of higher interest rates having been introduced for investors.
Growth in total compensation for employees of 3.5 per cent is quite soft after accounting for population growth.
Nevertheless after accounting for other forms of income the derived household saving ratio increased a bit in the March quarter following recent declines.
Overall, this was a strong and welcome headline result, but beneath the surface not that much has changed.
The economy is still doing a passable job of transitioning away from mining construction, but markets are still pricing that this time next year interest rates will likely be a notch lower than where they are today.
Next quarter the economy will rack up a remarkable 100 quarters since Australia’s last recession, a fine achievement well worth a doff of the baggy green cap!
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