National Accounts data released this morning by the ABS show strong economic growth. GDP increased by 1.0 per cent in the December quarter to be 2.8 per cent higher than a year ago.
Today’s release shows the severe impact of drought with farm production falling by 11.2 per cent in the quarter to be 22.8 per cent lower than a year ago. In contrast, non‑farm GDP grew by a robust 1.4 per cent in the December quarter, to be 3.5 per cent higher than a year ago.
Household consumption rose by 1.2 per cent in the December quarter to be 3.8 per cent higher than a year ago. Solid consumption growth is being supported by strong growth in household incomes. Dwelling investment grew by 1.4 per cent in the December quarter, continuing a gradual recovery from its recent mild slowdown.
New business investment increased by 1.7 per cent in the December quarter to be 2.1 per cent higher than a year ago. Engineering construction investment was particularly strong, increasing by 9.6 per cent in the quarter. Business investment continues to be supported by strong profit growth, with corporate gross operating surplus increasing by 2.9 per cent in the quarter to be 10.9 per cent higher than a year ago. The profit share is now at its highest level on record.
Mining investment continues to be a major contributor to growth in business investment, with over $43 billion invested by the mining sector since the beginning of 2004. Strong mining investment has begun to be reflected in higher production, with mining output increasing by 3.3 per cent in the December quarter, following a 5.8 per cent increase in the September quarter.
The terms of trade increased in the December quarter to be at its highest level since the early 1950s. The high terms of trade has boosted measures of national income, with real gross domestic income (GDI) growing by 1.4 per cent in the December quarter to be 4.2 per cent higher than a year ago. Over the past five years real GDI has grown at an average annual rate of 4.6 per cent, compared with 3.1 per cent for GDP.
Exports increased by 0.8 per cent in the quarter to be 4.1 per cent higher than a year ago. Exports of non‑rural commodities increased by 3.9 per cent in the quarter, while exports of elaborately transformed manufactures increased by 1.6 per cent. The overall export figures reflected a fall in rural goods exports (down 5.7 per cent in the quarter). Imports increased by 6.3 per cent in the quarter, with imports of capital goods growing particularly strongly.
The household consumption chain price index was unchanged in the December quarter to be 2.5 per cent higher than a year ago. As with the Consumer Price Index, the easing in consumer prices was associated with the unwinding of high fruit and fuel prices.
The December quarter national accounts show that the drought and the terms of trade are continuing to be major influences on the Australian economy. The drought has drastically reduced farm production and seen agricultural incomes fall to very low levels. Conversely, strong price rises have led to strong mining investment beginning to be reflected in increased mining production and exports of non‑rural commodities.
The non‑farm economy is growing more strongly, due to solid consumption growth and continued high levels of business investment. As the economy enters its 16th consecutive year of economic growth, high levels of business investment and strong profitability are laying the foundations for ongoing prosperity.