The National Accounts released today show that the Australian economy continued to grow in the June quarter, expanding by 0.5 per cent and 3.1 per cent over the year.
In light of the previous quarter, when the economy grew by 1.1 per cent, it was a strong outcome. It shows that the first half of 2014 was stronger than expected.
This is consistent with overall improvements in consumer confidence, business confidence and business expectations. Business conditions are at a four-year high and, on average, jobs this year have been created at three times the level we saw in 2013.
There is more to do - with a growth still below trend and the unemployment rate rising.
Imports of goods and services rose 3.7 per cent in the June quarter and exports of goods and services fell 0.8 per cent in the June quarter.
Taken together, net exports (exports less imports) subtracted 0.9 percentage points from growth in the June quarter, after contributing 1.2 percentage points in the March quarter.
Household consumption grew by 0.5 per cent in the quarter despite an unusually warm start to winter reducing both clothing sales and electricity demand.
Dwelling investment continued to grow, following strong building approvals, as the sector responds to the low interest rate environment. Dwelling investment rose by 2.3 per cent in the June quarter and it was skewed toward building new dwellings rather than alterations and additions.
A turnaround in inventory accumulation, particularly in manufacturing and mining, contributed 0.9 per cent to GDP growth in the June quarter.
New private business investment fell by 0.3 per cent in the quarter and was 4.4 per cent lower than a year ago. The fall in business investment is expected to continue in the near term as resource construction projects were completed and as non-resources business investment slowly gathers pace.
New public final demand remained subdued, growing by 0.4 per cent in the quarter and 1.2 per cent through the year.
Nominal GDP – the dollar value of goods and services produced in the economy – was flat in the quarter and rose by a relatively subdued 3.3 per cent through the year. The weakness was largely due to a 4.1 per cent fall in Australia’s terms of trade. Falling non-rural commodity prices dragged down the terms of trade and generated a 6.4 per cent decline in export prices in the quarter.
Compensation of employees – the total wage bill in the economy – grew by 0.8 per cent in the quarter. The weak growth in compensation reflects labour market conditions, with both employment and wages growing more slowly than usual.
Corporate profits fell by 3.0 per cent in the quarter, mainly due to the impact of commodity declines on the mining sector.
Overall, the outcome is stronger than was expected but growth remains below the long-term trend. This highlights the importance of continuing to do everything we can to drive momentum in the economy.