Jim Chalmers:
The economy grew 0.6 per cent in the June quarter to be 1.8 per cent higher through the year. This result was better than most economists expected. It’s a very welcome and substantial pick up in growth in our economy.
The particularly pleasing part of this is that our economy is gathering momentum in the face of some pretty substantial global economic headwinds. What we saw in the June quarter was the equal fastest quarterly growth rate in almost 3 years and the fastest annual growth rate in almost 2 years. And it’s especially encouraging when you remember that in this June quarter, a couple of big comparable economies like Germany and Canada went backwards, whereas in Australia growth is gathering pace. That’s a very welcome and very encouraging development.
The big story in today’s data is the private sector recovery and the reason we’ve got this chart here for you is because it shows you with the blue bars – which are the private economy – private final demand and the red bars are public final demand. It gives you a really helpful sense, I think, of the last couple of years and how the private sector has taken over from the public sector. There are good reasons for public sector spending in recent years to have helped keep the economy ticking over, but what you can see in that chart is the big story in these National Accounts and indeed, the National Accounts before them, is the recovery in the private sector. That’s a good thing.
This is the private sector recovery that we were planning for, preparing for and hoping for and you can see that in today’s National Accounts. New final demand, final private demand, grew 0.6 per cent in the quarter to be 1.9 per cent higher through the year. Private demand contributed 0.4 of a percentage point to growth and GDP per capita grew 0.2 per cent in the quarter.
The global comparisons are also useful. As I said, we’re getting this gathering pace in our own economy at the same time as there are very substantial headwinds in the global economy. Our economy is in an enviable position. Despite all of our challenges, which we acknowledge and we are upfront about it, the comparisons with our peers show that we’re in an enviable position.
If you look at last financial year we achieved what no major advanced economy could – we had continuous economic growth, unemployment in at least the low 4s and we had inflation below 2.5 per cent on the most reliable measure and so that combination does not exist in the major advanced economies, but it exists in our own economy. As you’ve heard me say, Australia is one of only 6 advanced economies that have grown every single quarter for the last 3 years – 32 out of 38 OECD economies have gone backwards at least one quarter in the last 3 years, and Australia is not one of them.
So if you look at this chart here, it shows Australia versus the major advanced economies. We now have the equal fastest annual growth when compared to the major advanced economies. And you can see that in the dark blue bar on the far left‑hand side. And where the rubber hits the road on this is in the next chart, where we’re seeing really quite extraordinary employment growth compared to the major advanced economies. Our employment growth has been much, much stronger than any major advanced economy and, again, that’s a good development.
So if the big story is the recovery in the private economy, the big contribution has come from private demand and seeing that, in particular, in the consumption figures. Today’s figures show growth in private demand continues to improve. That’s because of higher wages, lower interest rates and tax cuts for every taxpayer and the primary driver of the lift in the private demand was growth in consumption, which you can see in this chart here. Consumption grew .9 per cent in the quarter, contributing .4 of a percentage point to growth. You can see the way that consumption has come back on the left‑hand side of that graph. That is because of our efforts on wages, it’s because of the interest rate cuts and it’s because of the tax cuts as well.
Consumption is growing because real incomes are growing and under this government a very high priority is to make sure that people are earning more and keeping more of what they earn, and that’s what we see in today’s National Accounts.
Real incomes per capita, which is the measure we use of living standards, increased 2.4 per cent over the year. That’s now the strongest growth in almost 4 years. There was some volatility in the quarterly number, that was driven by the timing of insurance claims and social assistance benefits that were paid out in the previous quarter because of natural disasters. So some lumpiness quarter to quarter, but the through‑the‑year story on real incomes, you can see in that chart, that’s what the recovery in real incomes has looked like in our economy over the last couple of years.
We have acknowledged that the combination of the high and rising inflation that we inherited, the falling real wages that we inherited, the higher interest rates, all of that was combining to put quite substantial pressure on people and their incomes. And what that chart shows is a very substantial pickup from that trough to now something which looks quite healthy when it comes to real gross disposable income per person.
The momentum in annual real incomes growth reflects that combination of moderating inflation, solid wage and jobs growth and the government’s tax cuts as well as the lower interest rates. The wages measure grew by 1.1 per cent in the quarter. That’s 6.7 per cent higher through the year on the compensation of employees number. And what this means, if you take a step back, is that the wages share of income is now 54 per cent, and it was below 50 per cent when we came to office. So the wages share of income at 54 per cent, much higher than below 50 per cent when we came to office not that long ago.
Our tax cuts have contributed in these numbers to a decline in tax as a share of income. Income tax as a share of income was 15 and a half per cent in the quarter, down from 16.3 per cent in the quarter before our tax cuts started rolling out and we also saw more of that progress on inflation. When you look at the National Accounts measure of inflation, we see it at 2.9 per cent in annual terms, and that’s the lowest it’s been in 3 and a half years as well.
As the 3 rate cuts in 6 months flow through to household budgets, we are already seeing mortgage costs falling, and that will continue. These numbers don’t capture the full benefit of those 3 interest rate cuts in 6 months but already, mortgage interest costs have fallen by around $800 million since the end of last year so that’s a good development as well, of course.
Private investment made an important contribution to growth. Dwelling investment rose 0.3 per cent. Obviously getting more investment in housing, very high priority for this government, and you can see in that chart the progress that we’re making on dwelling investment. This is now the sixth consecutive quarter of growth, which is the longest run of quarterly growth in a decade when it comes to dwelling investment. So again, this is one of the really encouraging parts of the story in the National Accounts today. If you think about it in annual terms, it grew 4.8 per cent. That is 4 times the decade average now and it is much stronger than the negative 5.1 per cent we inherited when we came to office.
Business investment fell 0.4 per cent in the quarter to be 0.2 per cent higher through the year, part of that is explained by the completion of some big mining and renewable energy projects driving the quarterly number but this was partly offset by really solid growth in areas like computer software and investment in artificial intelligence. And if you look ahead, the pipeline of non‑dwelling construction projects and renewables projects remains pretty strong, and that will support growth in business investment going forward.
If you think about new business investment more broadly, it’s grown by an annualised average of 3.9 per cent under us. It was negative 1.3 per cent on average under our predecessors. And so we can do better on business investment, but the average annualised figure under us has been stronger than what we inherited. There are good reasons to believe that the pipeline is relatively strong but as always with quarterly business investment figures, they are relatively lumpy when you see big projects finish before new big projects start.
Public demand played an important role in the last 12 or 18 months or so in keeping our economy growing, but the private sector is now taking its rightful place as the primary driver of growth. And you and I have talked many times in here about how important that that is to us, to see the private economy take over and that’s what we’re seeing in these numbers. The new public final demand grew by 0.2 per cent. It made no contribution to overall growth and this follows the decline in the previous quarter.
On productivity, we saw a 0.3 per cent increase in the quarter and 0.2 per cent up through the year. We welcome the lift in quarterly productivity, but we don’t get carried away. We know that the quarterly outcomes can be volatile. We know that we’ve still got a very substantial challenge when it comes to productivity in our economy. You’d rather it going up like it is in these numbers than going down, as it has in recent data releases but we need some perspective here. We’ve got a lot of work to do collectively to make our economy more productive, a big priority of this government.
So if you bring it all together, under this government we’ve seen inflation down, debt down, real wages growing, unemployment low, interest rates falling and now we see economic growth picking up in very welcome and encouraging ways as well. That progress is a good thing, but again, we know that we’ve got much more work to do. We’ve got some persistent structural issues and people are still under pressure, so the government’s focus remains productivity and resilience and sustainability, but in these numbers today we take great heart. We are encouraged by our economy gathering pace in the June quarter, especially when you consider what’s coming at us from around the world.
Happy to take a couple of questions.
Journalist:
Treasurer, you mentioned the pipeline of renewable energy and mining projects coming through for business investment. A lot of those participants in renewable energy and so forth say there are problems with approvals and that sort of thing. How important are reforms in getting those approvals through, boosting the renewable energy projects and therefore contributing to higher growth and, you know, contributing to your budget as well?
Chalmers:
Yes, crucial. We’ve acknowledged before today that one of the big challenges that we accept and one of the big responsibilities we embrace is to get those approvals moving more quickly so that we can build the housing, the renewable energy projects, the critical minerals projects that we need to strengthen our economy into the future, including AI and data infrastructure and data centres as well.
So we’ve already identified this as a very big priority. Business investment will be the key going forward. The flow of capital is obviously central to all or almost all of our economic objectives because if we can get more investment and make our economy more productive, we can make it grow quicker, lift real wages and living standards over time, and that’s the combination we’re seeking.
And in these numbers today we acknowledge the flatness of business investment for the reasons I ran through. But really across almost every area, we are seeing some encouraging developments. Again, we don’t get carried away. We know there’s more work to do. We know that our economy still has weaknesses in parts, but overwhelmingly the story in these National Accounts is a very positive one.
Journalist:
Treasurer, the figures show household consumption of cigarettes fell 8.2 per cent in the quarter, the largest ever annual rate – frankly unbelievable – 22 per cent fall over the last 12 months again, another record. Is it believable? Do you think consumption has moved into the illegal space? And have you talked to David Gruen about what the hell they’re measuring in that space?
Chalmers:
Well, my answer to this question is pretty similar to the answers I’ve given you on earlier occasions – we know that there are 2 reasons why smoking in the official data is coming down. One is a good reason and one is a bad reason. The good reason is people giving it away, the bad reason is people avoiding the tax. We have acknowledged that there is illegal activity happening – more than acknowledged that, we’ve provided $350 million over 2 budgets to provide agencies and states and territories with the funds they need to fight criminals associated with the illegal tobacco trade.
We have seen some good busts in recent times. We have made some progress. But we’re not naïve enough to think that we have fixed this problem once and for all. We know it’s an ongoing challenge and you see in the numbers today with those dramatic falls in the official data that we continue to have a challenge here, and that’s why we will continue to see these hundreds of millions of dollars roll out in an effort to boost compliance.
Journalist:
Annual GDP growth was up 1.8 – or was 1.8 per cent, the RBA, which trimmed around 2 per cent. Where do you see the speed limit for the economy? How much hotter can we get from here?
Chalmers:
There are assumptions from the bank and from the Treasury, but I think the key to that question is really how do we lift the speed limit on our economy, we only do that by making it more productive, by making sure that we can get faster growth with low inflation and that’s really one of the motivating forces behind all of the work that we’ve been doing this term to try and lift the speed limit on the economy. 1.8 is a really good outcome in the context of what’s happening around the world and what’s happened in recent quarters, but over time we’ll need to do better than that, and that’s what we’re working on.
Journalist:
Treasurer, has Dan Andrews become a pawn for Chinese communist party propaganda by being photographed alongside Kim Jong Un and Putin?
Chalmers:
No. Jason.
Journalist:
How do these numbers impact the claim that 82 per cent of jobs over the last 2 years have been created through government spending?
Chalmers:
Yes, a couple of things about that. First of all, on Friday we’ll get new numbers which will answer that question more comprehensively. It depends on the measure that you use. Most of the jobs under us, 1.1 million jobs or so created under this government’s watch, most of them have been in the private sector overwhelmingly. There’s another measure, which is market versus non‑market, which our opponents like to use because they’re job snobs about jobs in the care economy. They are real jobs, they look like real jobs to me, looking after older people and people in the NDIS and early childhood education and so we’ll get those numbers on Friday.
We’ve been creating a lot of jobs in both parts of the economy and the overwhelming story out of these National Accounts – the number one big story out of these National Accounts – is the private sector is recovering in ways that we planned for, prepared for and hoped for. Very welcome development. The public sector is not making a contribution to these growth figures today, it’s private sector led, and that’s a good thing.
I’ve got Sam and Mark looking at me out here, and I need to finish up.
Journalist:
Treasurer, can the budget afford to provide more aged care places and more of those places sooner considering the increases in demand for the home care packages?
Chalmers:
I’ve got Mark Butler and Sam Rae here because they’re going to talk with you about that with more substance, but the short answer is yes. We will be able to do more here, and they’ll tell you all about it in a moment.
Journalist:
Treasurer, you’re meeting with state and territory treasurers on Friday, and you’ve already said you’re going to talk about road user charging. Will that discussion involve the fuel tax credits and congestion charges?
Chalmers:
I don’t think it will get to that level of detail. I think that the job for Friday is to hear the state and territories’ views – they’ve put together an options paper – and for us to agree or to discuss some principles behind this policy design. And as you know, the big question that people have been grappling with is how we take the time to get this right, whether we sequence these changes or do them in one lot. And so that’s what I expect the conversation on Friday to be all about. But once again, I’ll say what I’ve said every other time you’ve asked me – we’ll take the time to get this right. We’ll make sure it’s the right regime for our fiscal circumstances, but also to make sure that we don’t deter take‑up, for example, in EVs and all these other objectives. We’ll weigh all of that up, I’ll discuss that respectfully with my colleagues on Friday.
And with that, here’s Sam and Mark. Thanks.