The government is touting its economic credentials after this morning’s national accounts data from the Australian Bureau of Statistics showed the economy accelerating in the March quarter, thanks to exports and the strong performance of the service sector.
The economy grew 1.1% from the December quarter’s 0.7% (revised up from 0.6%) with annual growth rising significantly to 3.1% from 2.8% in the 2015 calendar year (although that annual figure was revised down from the 3.0% first reported in the December quarter national accounts).
The growth was driven by a rise in exports, as well as a stronger performance in service-based industries. That means the economy continues to grow at or around its trend line of 3%. The result was well ahead of expectations — the market had been looking for annual growth of 2.8%, and the news had the Aussie dollar rise three-quarters of a cent to just under 73 US cents.
The economy was able to withstand the impact of a nasty slide in commodity prices early in the quarter, which helped push the terms of trade down nearly 2% across the three months — not to mention a rocky start to the year for local and global financial markets. It also withstood the continuing slide in mining investment: private gross fixed capital formation fell 2.2%, driven by falls in new engineering construction (-6.4%) and new buildings (-6.9%). That’s the tenth successive quarterly fall in new engineering construction spending as the end of the mining investment boom works itself through the economy.
But the good news was that fall was almost offset by a 6.2% positive contribution from mining production, which contributed to the 4.4% growth in exports. In fact, mining has contributed significantly to growth in the past 15 months, powering the 0.8% (revised down from the 0.9% rise first reported) in GDP in the same quarter of 2015, and the 1.0% (revised down from 1.1%) in the September quarter of last year.
The ABS said that service based industries were the other big contributor to growth with finance and insurance (1.8%), retail trade, accommodation and food services (1.5%), and arts and recreation (0.9%) all increasing. Household spending rose 0.4%, unchanged from the December period.
The only slight concern is disinflation. “Broad based price falls were evident across the economy,” the ABS said, “as shown in the Consumer Price Index (CPI) which fell 0.2 per cent. The GDP price deflator, which shows the overall price movement in the Australian economy, fell 0.6 per cent in the March quarter.”
The terms of trade fell 1.9% after their 3.2% fall in the three months to December 31 in the March quarter and fell 11.5% through the year, which was a tiny bit better than the 12.0% fall recorded through calendar 2015. The net savings ratio was 8.1% in the quarter compared to the 7.6% reported in the December three months. And, importantly, trend real net national disposable income was flat — that’s a good sign compared to the negative territory that indicator has been in for some time. Next stop — wages growth?
And, importantly, trend real net national disposable income was flat — that’s a good sign compared to the negative territory that indicator has been in for some time. Next stop — wages growth?
Nice try, but you missed the next sentence from the ABS analysis:-
“Through the year Real net national disposable income fell 1.1% compared with an increase of 3.2% for GDP”.
Progress of a kind I suppose…
I agree this story has missed the most important fact contained in these figures.
As explained by Ian Verrender on last night’s ABC News, GDP increases are measured by volume, not by value.
As you have explained, real net national disposable income fell 1.1%, which is a real worry for the Federal Government.
But how is that possible when there was no cut in company tax?
Haven’t you heard, the only way to get any growth is to cut company tax rates. This is impossible!
Sorry, did I blow up your sarcasm meter.
I wouldn’t skate on that frozen pond.
I have to say that the black hole we are staring into is deflation which is being masked by interest rate cuts. You lend me some of your cheap money, I make more goods, I sell them at a cheaper price and I may have more workers but they don’t get apple pie as a bonus. Productivity has gone up but holistically due to the nature of competitive capitalism companies within industries are holding shivs to each others neck and demanding more from workers for no wage increase. China will soon be producing the cheapest steel on the planet. What will the LNP be doing about that??? We are screwed.
I am a TA and I want to let you know that the Gold price should be watched carefully. Aussies gold miners have performed handsomely on a 13% rise in gold. I am talking EVN, NST, SBM, even the hated big one NCM. Gold pulls back in May 8% and the miners are shorted down 13%. Factor in paper gold to real gold ratio of 500.1 and I am left asking what is going on. I have a feeling that real money(Gold) is being manipulated to allow transition of shares in miners from novice invertors to the Generals in Command. This will provide future mined gold to cover paper deals. An example is how the UN helped annexe PNG to the Indonesians when Suharto entered power. Under foreign investment the US dangled the carrot and the Grasberg mine was commissioned by Freeport McMoRan. Lets say it was cheap but the human cost was high. It helped fund the MI complex and cover paper gold deals. And Malcolm Turnbull this is for you. ‘If you want to rob a bank you best own one’. Didn’t you try that Mal or become a high level paper shuffler.