6 September 2023

National Accounts – June quarter 2023

The National Accounts show the Australian economy remaining sturdy in the face of unrelenting pressure.

Economic growth held up relatively well in the June quarter, despite the inevitable toll of high interest rates, high but moderating inflation and continuing global uncertainty, including the slowdown in China.

We know there are challenges ahead, but we face them from a position of relative strength.

The economy expanded by 0.4 per cent over the June quarter, matching the revised pace of the previous quarter, to be 2.1 per cent higher through the year. In the 2022‑23 financial year, the economy grew by 3.4 per cent.

This is a steady result, but we know that households are under pressure from the rising cost of living and higher interest rates.

Household consumption is moderating in expected ways, growing by just 0.1 per cent in the quarter. Australians have continued to pull back on discretionary spending to make room for essentials and to cover mortgage repayments, and are saving less out of their incomes. The household saving ratio declined to 3.2 per cent, its lowest level since mid‑2008.

People are also spending less on renovating their homes, which contributed to a decline in dwelling investment in the quarter.

Despite these headwinds, our economy continues to benefit from a strong labour market, the beginnings of wages growth, easing supply chain pressures, and a welcome boost in our tourism and education exports.

With continued strength in our labour market and more Australians in jobs, compensation of employees rose by 1.6 per cent in the quarter and was 9.6 per cent higher through the year.

Inflation is moderating, but is still too high and we’d like to see it moderate faster. The National Accounts measure of consumer prices grew 6.1 per cent in the year to the June quarter 2023.

It’s pleasing to see that supply chain pressures are continuing to ease, contributing to strong public investment and making it easier for businesses to access the machinery and equipment needed to add to capacity and grow.

New business investment grew by 2.1 per cent in the quarter, and the strength in non‑dwelling construction was driven by renewable energy projects, including solar and wind farms in the eastern states.

There was an unusually large inventories detraction in the quarter. While this reflects some one‑off factors such as the clearing of quarantine backlogs, it also provides encouraging evidence that firms are more confident they can access goods as needed on global markets.

Services exports grew by a strong 12.1 per cent in the quarter, with returning international students and overseas visitors supporting the recovery in our education and tourism sectors.

While we have been clear and upfront that we expect our economy to slow considerably over the next year, we enter this period of uncertainty from an enviable position.

The Australian economy grew faster than most of the major advanced economies through the year to June quarter 2023 – faster than Germany, the United Kingdom, France, Canada and Italy.

We continue to get good prices for our key exports.

Although the labour market is softening, unemployment remains near historic lows and more than 14 million Australians are in work.

We are seeing a welcome boost to our tourism and education sectors.

We’ve got the Budget in much better nick, having delivered the first surplus in 15 years.

We know households remain under the pump, which is why we’re focussed on helping Australians through these difficult economic times.

This month alone the Government is rolling out further targeted and responsible cost‑of‑living relief to Australian households in a way that doesn't add to the inflation challenge.

We are laying the foundations for future growth by investing in our people and their skills, broadening and deepening our industrial base, investing in the energy transformation and getting capital flowing to where it delivers the best returns and the most benefit to the nation.

The Albanese Government remains focused on dealing with the immediate challenges Australians are facing, while at the same time building a stronger, more productive, and more resilient economy for the future.