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 March 2010

NO.014

National Accounts – December Quarter 2009

Today's National Accounts report a very solid outcome for the Australian economy, with the economy growing strongly in the December quarter and continuing to outperform other advanced economies.

GDP grew by 0.9 per cent in the December quarter to be 2.7 per cent higher through the year. This is an exceptional outcome in what has been a devastating year for the global economy. During the worst global financial and economic crisis in 75 years, when most advanced economies contracted, the Australian economy not only continued to grow, but grew solidly.

In year-average terms, advanced economies as a group contracted by a record 3.2 per cent in 2009, and the global economy contracted for the first time in the post war period. In contrast, the Australian economy grew by 1.4 per cent in 2009. Without the fiscal stimulus, in year-average terms, Treasury estimates that the economy would have contracted by 0.7 per cent in 2009.

To date, much of the impetus for growth has come from fiscal and monetary stimulus, but today's National Accounts provide further evidence that a self‑sustaining private sector recovery is starting to take hold. The Government's economic stimulus is providing a firm foundation for the economy, with private sector demand starting to pick up as stimulus is progressively withdrawn.

The estimated net effect of the stimulus measures on growth in the December quarter is 0.2 of a percentage point, with the effects of infrastructure spending and the tax incentives for private investment adding to growth, while the diminishing effects of the earlier cash payments to households continued to detract from growth.

Household consumption spending rose by 0.7 per cent in the quarter. Earlier in the year consumption was sustained by the Government's household stimulus payments; today's result reflects welcome strength in consumer spending underpinned by strengthening labour market outcomes and higher levels of confidence.

New business investment rose by 4.7 per cent in the quarter, with new machinery and equipment investment rising by 11.0 per cent, boosted by the Small Business and General Business Tax Break.

Despite the overall improvement in the investment climate, non-residential building investment continued to fall in the quarter, the fifth straight quarterly decline, and is now more than 20 per cent lower through the year. This outcome would have been even worse if it were not for the impact of the Government's Building the Education Revolution program in non-government schools.

New dwelling investment also declined in the quarter, although it was more than offset by a solid rise in alterations and additions. Engineering construction eased a little but remained at very high levels.

Investment spending in the quarter was supported by increased stimulus-related public investment. Public investment spending rose by over 10 per cent in the December quarter, underpinned by a 13.0 per cent rise in state and local government investment. This was largely driven by the Government's stimulus spending, particularly on education infrastructure. Public investment contributed 0.6 per cent to growth in the quarter.

The outlook for private business investment is improving. Business confidence has rebounded and profitability is slowly recovering. After falling for four consecutive quarters, the gross operating surplus of private non-financial corporations rose by 4.8 per cent in the December quarter. Gross mixed income rose by 3.7 per cent, reflecting better outcomes for smaller businesses. The private sector is looking increasingly well placed to pick up the slack as the Government's fiscal stimulus is progressively withdrawn over coming quarters.

The tentative global recovery was reflected in a pick-up in exports in the December quarter. Export volumes increased by 1.7 per cent in the quarter, underpinned by increased demand for non-rural exports. Import volumes rose by 7.7 per cent in the quarter, reflecting the solid growth in consumption and the recovery in machinery and equipment investment. The terms of trade rose by 2.9 per cent.

Overall, today's National Accounts show that Australia's economy continues to strengthen, underpinned in part by the fiscal stimulus, and increasingly by a recovery in private sector demand. The economy has proved remarkably resilient, with the strong outcomes to date providing a solid base for a broadening recovery over the coming year.

CANBERRA
3 March 2010