The National Accounts released today showed the economy grew at 0.3 per cent in the September quarter and 2.7 per cent over the year.
These figures represent the first twelve months of the Coalition in Government.
During the corresponding twelve months of the previous Labor government annual growth was just 1.9 per cent.
The National Accounts are backward looking.
Whilst the September figures are weaker than market expectations, 0.3 % is only marginally lower than what we were expecting as a result of the transition in the economy.
These National Accounts reflect quite starkly the resources sector switching from significant investment to significant production.
Export volumes have been strong.
Net Exports are strong. (Chart 2)
Iron ore production in particular has picked up more strongly than expected at Budget time. However prices for iron ore and thermal coal, two of our biggest exports, have fallen dramatically in recent times.
More broadly the National Accounts show that the transition from a mining boom to broader based growth is also well underway.
Over the last twelve months we have seen a pickup in consumption growth, although there is a further way to go. (Chart 3)
Even though in the September quarter dwelling investment was disappointing, this is a volatile series. Over the year dwelling investment growth has been strong and forward indicators point to this continuing.
Nominal GDP fell in the September quarter. This was driven by significant falls in commodity prices. (Chart 4)
As I have said before this has implications for the Budget.
Real gross domestic income (GDP adjusted for the terms of trade) has now fallen for two quarters. This reflects the larger than expected fall in the Terms of Trade. (Chart 6)
It should be noted that we have had similar falls in the past 6 years. (Chart 5)
These National Accounts show that it is important that we continue to implement policies that stimulate growth and create jobs.
In the first two weeks of the September quarter we abolished the carbon tax and electricity prices fell. This importantly reduced energy costs for businesses and households. (Chart 9)
Reduced energy prices helped mitigate the impact of lower income for households.
Lower energy prices also helped businesses better cope with the impact of a stubbornly high Australian dollar.
I note the Australian dollar has fallen significantly in recent times. This is much welcomed. It helps to cushion the economic impact of falling terms of trade.
A lower exchange rate is an important driver for rebalancing growth across the economy.
New business investment continued to fall in the quarter as resource investment fell. Thank goodness we abolished the mining tax which was a disincentive for new investment across the sector.
It has been vitally important that, over the last twelve months, we have accelerated approval for over $1 trillion of investment outcomes through 300 newly approved projects across the country.
Looking forward, business conditions have caught up with growing business confidence (Chart 13), and our Free Trade Agreements will support a pickup in growth across the economy.
This will be of particular benefit to the services sector which is 70 per cent of our economy but just 17 per cent of our exports. (Chart 7)
Clearly the decline in public final demand (Chart 14) is linked to a decline in state government spending.
These National Accounts confirm the necessity for the delivery of the Government’s plan to significantly increase infrastructure spending over the next few years.
We expect the States to help us roll out this new productive infrastructure as quickly as possible.
This will support growth and jobs in the short and medium term and it will lift our nation’s productivity.
These National Accounts confirm that when it comes to the future of the Australian economy complacency is our enemy.
Doing nothing on economic reform is not an option.
The Government is determined to continue to deliver its Economic Action Strategy.
This involves getting the Budget under control, removing taxes, removing red tape, building infrastructure and growing trade.
This all helps Australia cope with events beyond our control.
Even though economic growth over the last twelve months is considerably better than the previous twelve months there is still much work to be done.
We are determined to work with the Australian people to strengthen the Australian economy to take advantage of the many positive opportunities that lie ahead in 2015 and beyond.