4 September 2019

National Accounts - June Quarter

Today’s National Accounts show that the Australian economy has completed its 28th consecutive year of economic growth – a record unmatched by any other developed economy.

It’s a reminder of the economy’s remarkable resilience and a repudiation of all those who have sought to talk it down.

In the June quarter, real GDP grew by 0.5 per cent to be 1.4 per cent higher through the year. In year-average terms, real GDP grew by 1.9 per cent in 2018/19. The 1.9 per cent is slightly below the budget forecast of 2¼ per cent which is also in year-average terms.

In the June quarter, nominal GDP grew by 1.2 per cent and 5.3 per cent in year-average terms for the 2018/19 year. Nominal GDP growth was slightly above the budget forecast for 2018/19 of 5 per cent.

Significantly, these numbers do not incorporate the passage through the Parliament of the most significant tax cuts in more than 20 years and the full impact of the 50 basis point reduction in interest rates.

As of today, the ATO has issued more than 5.5 million individual tax refunds for the 2018/19 year totaling more than $14 billion. This money is flowing through to households and will be reflected from the September quarter onwards.

The combination of these tax and interest rate cuts, the stabilisation of the housing market, continued high levels of spending on infrastructure and a more positive outlook for investment in the resources sector has led the RBA Governor to say “there are signs the economy may have reached a gentle turning point”.

The fundamentals of the Australian economy are strong.

We have maintained our AAA credit rating.

Employment growth at 2.6 per cent is more than twice the OECD average and more than three times what we inherited when we came to Government.

A record number of Australians are in work, the participation rate has never been higher and more than 1.4 million new jobs have been created since we came to office and around 8 out of every 10 new jobs being full-time over the past year.

The proportion of those of working age on welfare is now at its lowest level in 30 years.

Free Trade Agreements now cover over 70 per cent of our two-way trading relationships and our current account is in surplus for the first time since 1975.

In today’s National Account numbers, net exports, new public final demand, household consumption and mining investment all contributed to real GDP growth.

Household consumption, which comprises just under 60 per cent of GDP, grew by 0.4 per cent in the June quarter. Expenditure in 14 out of the 17 consumption components increased in the quarter including recreation, clothing and footwear. The largest fall in the quarter was in purchases of motor vehicles.

Dwelling investment has fallen for three consecutive quarters, detracting 0.2 percentage points from growth in the June quarter. This comes after several years of strong annual growth averaging above 5 per cent.

Mining investment grew by 2.4 per cent in the quarter. It was only the sixth time it has grown in 24 quarters since the height of the mining investment boom in 2012/13. Importantly there was an increase in mining-related investment in machinery and equipment. New non-mining business investment fell by 1.1 per cent in the quarter, but is 1.5 per cent higher through the year.

New public final demand, which includes spending by all levels of government, rose by 1.5 per cent in the quarter to be 5.2 per cent higher through the year. This was driven by public consumption including higher disability and aged care funding and flood remediation works in Queensland.

However, public final demand will also continue to be supported by the Commonwealth’s 10 year $100 billion pipeline of infrastructure spending.

Net exports made a substantial contribution to real GDP growth of 0.6 percentage points in the June quarter. Imports fell in the quarter, while export growth was driven by mining exports, which rose by 2.4 per cent.

Rural exports fell by 4.3 per cent in the quarter. The drought continues to have a devastating impact on the farm sector, with farm GDP being 8.3 per cent lower through the year.

Inventories detracted 0.5 percentage points from growth in the quarter. This includes a reduction in manufacturing, wholesale trade and mining inventories, partly related to weather events particularly the drought.

Company profits increased by 2.4 per cent in the quarter to be 12.8 per cent higher through the year. The rise in company profits was driven by strong mining profits which were 10.6 per cent higher in the quarter. Profits outside the mining sector fell 0.6 per cent, but remain 1.8 per cent higher through the year.

Growth in compensation of employees (COE), which measures the national wage and salary bill, was up 1.3 per cent in the June quarter to be 5.0 per cent higher through the year.

Average earnings, as measured in the national accounts, grew by 0.9 per cent in the quarter to be 2.5 per cent higher through the year. This is broadly consistent with the Wage Price Index (WPI) at 2.3 per cent.

Importantly, living standards continue to increase with real net national disposable income per capita rising 1.0 per cent to be 2.7 per cent higher through the year.

Productivity fell by 0.1 per cent in 2018/19 reflecting the challenge our economy faces.

As I said in a speech last week, we need to boost our productivity to grow wages and the economy in the future. This requires governments and businesses working together on a number of fronts.

Today’s National Account numbers show the Australian economy continues to grow in the face of significant headwinds, both domestic and international.

It is a difficult time for global economies with both the IMF and OECD downgrading their global economic outlook and Germany, the United Kingdom, Sweden and Singapore, among other nations, recording negative economic growth in the June quarter.

In the face of these challenges and the uncertainty created by the increasing trade tensions between China and the US, the Australian economy has again proven its remarkable resilience.

The Morrison Government is implementing its economic plan as set out in the budget helping the Australian economy continue to grow, creating more jobs and delivering lower taxes.