Today’s National Accounts show the Australian economy performing solidly in the face of steep headwinds from overseas as well as considerable and compounding pressures on Australian families and businesses.
Our economy has withstood the challenges facing it so far, but we know there are bigger challenges to come.
These numbers capture some but not all of the pressures coming at us from around the world.
The uncertainties facing our economy are ahead of us, not behind us.
Gross domestic product grew by 0.6 per cent in the September quarter to be 5.9 per cent higher through the year.
Growth was driven by household discretionary spending, which continues to recover from its pandemic lows. Consumption grew by 1.1 per cent in the quarter, reflecting strength in spending on discretionary services, and has increased by 11.8 per cent through the year.
We are pleased to see that household income also grew strongly. Compensation of employees grew by 3.2 per cent in the quarter, the strongest since 2006. This reflected both underlying strength in wages as well as the Fair Work Commission’s determination, supported by the Government, that increased the National Minimum Wage and the increase in the Superannuation Guarantee.
We welcome the tentative signs of easing in some materials and labour constraints along with reduced impacts from wet weather conditions compared to previous quarters.
Dwelling investment grew by 1.0 per cent in the quarter and there remains a strong pipeline of housing projects to be completed. The increase in goods imports in the quarter also points to signs of easing disruptions in global supply chains.
New private business investment rose by 0.7 per cent in the quarter, to be 3.7 per cent higher through the year. This was largely driven by increases in new engineering construction and new building.
While net exports detracted 0.2 per centage points from real GDP in the September quarter, this was largely the result of Australians’ willingness to travel and spend overseas and weather disruptions to exports.
Despite these solid headline figures for September, we know Australian households are feeling the strain of the combined impact of the global energy crisis, cost‑of‑living pressures and rising interest rates.
The household savings ratio fell for the fourth consecutive quarter from 8.3 to 6.9 per cent and the national account measure of prices rose rapidly in the quarter.
The impact of a weakening global economy and global volatility was evident in the results today.
In the September quarter, prices for some of our mining commodity exports – particularly iron ore and metallurgical coal – fell amidst weakening demand from China. At the same time, import prices increased, partly impacted by the depreciation of the Australian dollar.
As a result, the terms of trade experienced its largest quarterly fall since June 2009 and the current account returned to deficit for the first time since March 2019.
But of course, since the end of the September quarter, we have seen a rebound in some commodity prices.
We’ve also seen more rate hikes, floods continuing, and further evidence of the deteriorating global growth outlook which we expect to weigh on growth in coming quarters.
Our future prospects will be heavily impacted by factors out of our control including:
- the ongoing global energy price shock from the invasion of Ukraine
- the largest COVID outbreak in China to date
- heightened uncertainty in the largest advanced global economies
- the promise of further tightening from central banks around the world; and
- unpredictable weather conditions, especially over the Australian summer.
That’s why the October Budget provided responsible cost‑of‑living relief, made targeted investments in a stronger more resilient and more modern economy, and showed spending restraint.
The Government’s economic plan is all about tackling inflation, making the Budget more responsible and building our economic resilience to withstand global and domestic shocks into the future.
We are confident and optimistic about the future of our economy, but we have some difficult global conditions to navigate in the months ahead.