2 June 2021

National Accounts Press Conference

Today’s National Accounts confirms the Australian economy continues its strong recovery from the biggest economic shock since the Great Depression.

Even though my fellow Victorians are going through their fourth lockdown, the outcomes of the Australian economy continue to compare favourably to international peers.

It is because of the sacrifices we have made that the economy is in the strong position it is today.

Our economic plan is working.

Today’s National Accounts confirm Australia is leading the global economic recovery.

In the March quarter, employment surpassed pre-pandemic levels - a feat no major advanced economy has yet achieved.

And today we confirm, the Australian economy is even bigger than what is was going into the pandemic - a feat achieved by no major advanced economy around the world.

Real GDP increased 1.8 per cent in the quarter to be 0.8 per cent higher than its pre-pandemic level.

In just over a year, the economy has recovered what it lost, faster than any recovery from any major downturn in recent history and nine months earlier than previously forecast.

Coming out of the COVID-19 induced recession, GDP has grown by 8.7 per cent over the last three quarter.

This is the strongest period of growth since 1968. That is the strongest growth in more than half a century.

The strength of our economic recovery is an achievement all Australians have contributed to and all Australians can be proud of.

It is in contrast to the Japanese economy, the French economy, the German economy, the British economy and indeed the Euro area. In those other economies we saw a contraction in the March quarter whereas Australia grew by 1.8 per cent.

On the health front, several countries around the world experienced their highest number of new daily COVID-19 infections and deaths in the March quarter of 2021.

At home, there are still sectors and regions that are doing it tough, but our economic support will continue, and today’s National Accounts confirm that a strong, broad-based recovery is underway.

Most encouragingly, the economic recovery is increasingly being driven by the private sector with economic support more than halving over the quarter.  

Household consumption, dwelling investment, and business investment all contributed strongly to growth in the March quarter.

The recovery has been driven by a strong recovery in household spending supported by income support and tax relief. These measures have ensured that despite the economic shock household disposable income has remained above pre-pandemic levels.

Household consumption grew by 1.2 per cent in the quarter and is now 14 per cent higher compared to the June quarter 2020 - the strongest period of growth on record.

Consumption was up in ten of the seventeen categories driven by higher levels of spending on consumer services as the economy continues to open up, with the largest spending increases in hotels, cafés and restaurants, and transport.

Importantly we are seeing the positive impacts flowing from our unprecedented investment incentives.

Dwelling investment recorded its strongest quarterly growth since 2003.

Construction of new houses grew at its fastest rate in more than two decades, as did alterations and additions.

This is being supported by the Government’s HomeBuilder program with more than 133,000 applications expected to support over $33 billion of residential construction projects under the program

Following the largest business tax incentives on record, we are seeing a strong rebound in new business investment which increased 3.6 per cent in the March quarter.

Since the October Budget, investments in new machinery and equipment has increased at its fastest rate since March 2003 increasing by 8.5 per cent in the December quarter and 10.3 per cent in the March quarter to be 7.2 per cent higher over the year.

Investments are broad based across mining and non-mining industries, across a range of different assets such as excavation equipment, forklifts, vehicles and autonomous tech in the mining sector.

Following several quarters of strong growth, new public final demand was flat in the quarter, as GDP growth continued to be driven by growth in the private sector.

A fall in public consumption was more than offset by growth in new public investment reflecting investment in a range of public infrastructure projects.

Inventories contributed 0.7 percentage points to growth with wholesalers and retails restocking having run down inventories in recent quarters and in anticipation of future sales with forward order books having increased sharply.

Net exports detracted 0.6 per cent from growth in the March quarter, driven by an increase in import volumes reflecting the strong recovery in domestic demand.

Exports increased by 0.5 per cent in the March quarter driven by another strong quarter for rural exports driven by bumper harvests.

The strong conditions in the rural sector has seen farm GDP increase 38.9 per cent over the year – the strongest growth since 2004.

Iron ore exports also strengthened with metal ores and mineral exports reaching its highest value on record of $48.2 billion in the March quarter.

This has helped to see the trade balance and current account balance increase to record highs in the March quarter with the current account surplus extending for eight quarters the longest period on record.

Services imports and exports both remained significantly down through the year, reflecting the continued impact of the border closure on services trade. 

Nominal GDP increased by 3.5 per cent, driven by a 7.4 per cent increase in the terms of trade supported by higher commodity prices, particularly for iron ore.

Turning to income, compensation of employees, the measure of the national wages bill, increased 1.5 per cent in the quarter.

This comes as employment surpassed pre-pandemic levels in the quarter following 194,000 jobs created in the quarter.

Household gross disposable income increased by 1.0 per cent in the quarter to be 4.3 per cent higher through the year.

Growth in household income was supported by further tax relief with $3.4 billion flowing to more than 11 million individuals in the March quarter.

With the continued recovery in consumption, the household savings ratio decreased to 11.6 per cent in the March quarter following a record high in the June quarter.

Strong household balance sheets, driven by income growth, tax relief and the elevated saving ratio, will provide ongoing support for the economic recovery as confidence continues to build. 

Company profits fell during the March quarter reflecting the continued reduction in emergency policy support as the economy recovers.

The fall was partly offset by strength in mining profits, reflecting the strength in the terms of trade.

Remarkably living standards, as measured by the ABS’s preferred measure of real net national disposable income per capita, has risen to a record high and are 5.8 per cent higher through the year – the strongest growth in a decade.

Today’s National Accounts demonstrate the strong momentum across the Australian economy.

That being said, challenges remain. 

As recent events in my home state of Victoria remind us, we are still in the midst of a global pandemic, a pandemic that is still with us. We cannot be complacent.

Since the end of JobKeeper, Victoria is the third state to endure a short lockdown.

The economic impacts of these outbreaks are not insignificant, but the Budget just over two weeks ago anticipated that further outbreaks would occur.

Our Budget measures were calibrated accordingly, with the Budget providing more than $40 billion in economic recovery and response support bringing total direct economic support to $291 billion.

Should extended lockdowns be avoided and outbreaks contained, the national economy can continue its strong economic recovery.

Today’s figures show that Australia remains in an enviable position.

Just this week, the OECD has upgraded Australia’s economic outlook, expecting the economy to grow by 5.1 per cent this calendar year and 3.4 per cent next year.

In retaining our AAA credit rating, Moody’s has stated that the Budget reflects “stronger growth and fiscal outcomes than expected.” This supports Australia’s credit quality.

We have maintained our AAA credit rating from all three major rating agencies.

The labour market is resilient with the unemployment rate falling for a sixth consecutive month to 5.5 per cent.

Household balance sheets are strong and confidence is high.

Businesses are responding to our policies to invest and hire.

Our economic plan is working.

The job is not done, but you wouldn’t want to be in any other country but Australia.