The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Wayne Swan

Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

3 December 2008

NO.134

 

National Accounts - September Quarter 2008

Today’s National Accounts are a positive outcome for Australia, in the context of a rapidly deteriorating global environment.

The slowing of our economy in the September quarter showed that we cannot completely resist the pull of international economic forces, but we are better placed than other nations to face this global financial crisis.

GDP increased by 0.1 per cent in the September quarter to be 1.9 per cent higher through the year. 

This is a positive result compared with the profound slowing being experienced in many advanced economies around the world.  The US, UK, Germany, Italy, Spain, Japan, Singapore and Hong Kong have all recorded negative growth in GDP in the September quarter, and two thirds of OECD economies are expected to record negative growth in 2009.

So while other countries are contracting, our economy continues to grow.

GDP growth in the quarter was supported by strong output from the farm sector, which rose 14.9 per cent, albeit from a low base.  Non-farm GDP fell by 0.3 per cent, but remains 1.7 per cent higher through the year. 

The September quarter outcome was also affected by the impact of the gas plant explosion on Varanus Island in Western Australia, which is evident in the weakness of exports in the September quarter.  The impact of this explosion is estimated to have subtracted around ¼ of a percentage point from GDP growth in the September quarter.

The National Accounts show that households have pulled back on their spending as the extent of the global financial crisis has become apparent.  While incomes remained strong in the September quarter, assisted by the tax cuts which began on 1 July, consumption grew by only 0.1 per cent in the September quarter.  Households continue to direct their incomes to rebuilding their balance sheets, with the household saving ratio rising to 3.9 per cent in the quarter.

New business investment continues to support growth, although growth rates have slowed from recent rapid increases.  New business investment rose by 1.8 per cent in the September quarter to be 12.5 per cent higher through the year.  The rise was driven by new engineering construction, which increased by 11.8 per cent in the quarter as work continued on major resource projects.  Engineering construction is expected to be solid over the next few quarters as work on large projects in the pipeline continues.  Nevertheless, the outlook for business investment will be sensitive to developments in the world economy and ongoing disruption to financial markets.

Net exports detracted sharply from growth in the quarter.  Import growth remained strong in the quarter, as strong business investment continued to drive imports of capital goods.  In contrast, export growth was flat, buffeted by slowing demand from the weakening world economy and the impact of the Varanus Island gas explosion on many exports originating from Western Australia.

Nevertheless, continued increases in the prices of iron ore and coal meant that the terms of trade rose by a further 5.6 per cent in the September quarter, and a quarterly trade surplus was recorded for the first time since the March quarter 2002.

The September quarter results come before the intensification of the global financial crisis which we have seen in recent weeks.  Since then the outlook for the global economy has deteriorated rapidly.  This has in turn lowered expectations for commodity prices.  Australia’s share market, along with others around the world, has also fallen sharply.  This is consistent with the Government’s view that there are downside risks to our outlook.

But the September quarter outcomes also come before significant policy action here and around the world to support economies during this financial crisis. 

The Rudd Government has acted early and decisively to strengthen growth and help buffer the Australian economy against the global financial crisis.  The $10.4 billion Economic Security Strategy will provide support to Australian households and protect jobs during these turbulent times.

The $15.1 billion COAG package will help stimulate growth, boost employment, and drive a continued national reform agenda to strengthen the economy.  $300 million will be delivered to local councils to build local community infrastructure.

Adding to this support, the Reserve Bank of Australia has cut the official cash rate by 300 basis points since September.  This means fiscal policy and monetary policy are working together to strengthen the Australian economy and protect jobs in the face of difficult global conditions.

The global financial crisis continues to evolve in unpredictable ways and could have a long way to run.  The Rudd Government remains committed to taking whatever action is necessary to strengthen growth and limit the impact of the global recession on Australian jobs.

CANBERRA
3 December 2008