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

2 June 2010

NO.045

National Accounts – March Quarter 2010

Today's National Accounts report a solid outcome for the Australian economy in the March quarter, but with uneven outcomes across different sectors.

Gross Domestic Product (GDP) grew by 0.5 per cent in the March quarter to be 2.7 per cent higher through the year.

Australians should take confidence from another good outcome for an economy that has defied recession with the help of stimulus and continues to be one of the strongest in the developed world.

The positive outcome for the quarter provides tentative signs that a self-sustaining private sector recovery is in prospect, although growth still relies on public infrastructure investment.

The Government's infrastructure investment is continuing to support demand, providing necessary targeted support to those parts of the economy where it is most needed.

Other stimulus measures – such as the payments to households and tax incentives for private investment – which supported the broader economy over the past year when global contractionary forces were at their peak, are being unwound. The withdrawal of stimulus is estimated to have subtracted around 0.1 of a percentage point from GDP growth in the March quarter.

Household consumption spending rose by 0.6 per cent in the quarter. This solid outcome reflects Australia's strong employment outcomes and strengthening incomes growth, which is sustaining consumption even as the effects of the earlier fiscal and monetary stimulus are unwound.

Dwelling investment declined by 1 per cent in the quarter, with a substantial fall in new and used dwelling investment, only partly offset by a rise in alterations and additions.

New private business investment fell by 3.3 per cent in the quarter, with new machinery and equipment investment falling by 6.2 per cent. This reflects the unwind of the effects of the Small Business and General Business Tax Break, which brought forward considerable investment spending into the latter part of 2009.

Private non-residential building investment fell further in the quarter and remains at a depressed level. Without the substantial ongoing support provided to the sector by the Building the Education Revolution program, activity and employment in this sector would be even lower. Engineering construction also declined in the quarter, but activity remains at a high level and there is considerable work in the pipeline that will flow through in coming quarters.

Despite this weakness, prospects for business investment are improving with business confidence at high levels and profitability recovering. Corporate gross operating surplus rose by 1.3 per cent in the March quarter following strong growth in the December quarter. Gross mixed income rose by 5.6 per cent in the quarter and is now up by over 15 per cent over the year, reflecting better outcomes for smaller businesses.

New public investment spending rose by 12.5 per cent in the March quarter, underpinned by a sharp rise in state and local government investment. The continuing strength of public investment – up more than 40 per cent over the past year – has been driven by the Government's stimulus investment, particularly on education infrastructure.

The terms of trade rose by 4.2 per cent in the quarter and further rises are in prospect. Import volumes rose by 1.8 per cent in the quarter, in line with the pickup in domestic spending. Export volumes fell in the March quarter due to a temporary fall in coal exports caused by cyclone activity and flooding in Queensland. Other major export categories grew, and with demand for commodities accelerating and export prices expected to continue to rise, the prospects for exports are very positive.

The solid growth in the economy and the pickup in the terms of trade saw nominal GDP rise by 2.1 per cent in the quarter, to be up over 4 per cent over the year.

Today's National Accounts provide further evidence that Australia's economy is performing well. But they also reinforce the need for ongoing support from public infrastructure spending as the transition from public to private sector led activity proceeds, as well as the need for ongoing reform to take full advantage of the opportunities that lie ahead.

CANBERRA
2 June 2010