The National Accounts data released today show that the Australian economy grew 1.1 per cent in the March quarter 2014 and 3.5 per cent over the year.
Net exports were the largest contributor to growth in the March quarter, reflecting strong export growth in the mining sector as a result of unusually low levels of cyclone‑related disruptions. Consistent with balance of payments data released yesterday, the National Accounts show that exports of goods and services increased 4.8 per cent in the March quarter while imports fell 1.4 per cent.
Profits were up in the March quarter, with the gross operating surplus of private non‑financial corporations increasing by 1.6 per cent. As in the December quarter, some of this increase is the result of stronger production in the mining sector.
Household consumption increased by 0.5 per cent in the March quarter to be 2.8 per cent higher over the year. The household saving ratio was almost unchanged, rising from 9.6 per cent of disposable income in the December quarter to 9.7 per cent in the March quarter.
Dwelling investment rose strongly, up 4.7 per cent in the March quarter and 8.0 per cent over the past year. This is consistent with the very strong level of residential building approvals seen in the second half of 2013 and early 2014. Low interest rates and the increase in house prices over recent years will continue to support dwelling investment growth.
New private business investment fell 1.2 per cent in the March quarter to be 4.0 per cent lower over the past year. The fall in private business investment is consistent with a gradual winding down of construction activity in the mining sector, as work on major iron ore and gas projects reaches a more advanced stage.
New public final demand fell by 0.2 per cent in the March quarter.
Compensation of employees—the total wage bill in the economy—increased by 0.7 per cent in the March quarter, reflecting weak wages growth consistent with softness in the labour market.
Nominal GDP—the dollar value of goods and services produced in the economy—increased 1.1 per cent in the March quarter to be 4.9 per cent higher over the past year. Australia’s terms of trade fell 1.2 per cent in the March quarter, while growth in domestic prices was subdued.
The stronger growth evident in today’s numbers is welcome, but the composition of growth continues to highlight challenges faced by the economy. The mining sector will continue to be a major contributor to GDP growth, but this will increasingly come from production and exports rather than construction and investment. This new phase will be less employment‑intensive, highlighting the need for growth in the non‑mining sectors of the economy.
To support growth in non‑mining sectors, the Government needs to offer a supportive, predictable and sustainable policy environment. That is why we need to remove the Carbon Tax and the Mining Tax, and introduce practical reforms to boost participation and productivity.
The May Budget is part of an Economic Action Strategy that ensures Government spending and taxation will be sustainable so that we do not ask future generations to subsidise the current one.