National Accounts: September Quarter 2001

In the face of an ailing world economy with synchronised downturns in North America, Europe and Japan, the Australian economy has maintained a very strong growth momentum through 2001. In seasonally adjusted terms, GDP grew by a robust 1.1 per cent in the September quarter of 2001, building on the strong growth of 1.8 per cent recorded over the March and June quarters. Growth through the year to September 2001 was 2.5 per cent. Strong economic growth continues to be accompanied by low inflation.

The Australian economy remains well on track to markedly outperform most of the developed economies in 2001. Over the first three quarters of 2001, Australia's growth was around five times higher than the average growth for the G7 economies.

Economic growth in the September quarter was bolstered by dwelling investment, which rose by 13.7 per cent, the largest quarterly increase on record. Forward indicators for housing construction, such as building approvals and commencements remain very positive, pointing to further growth in residential construction in the months ahead.

Household consumption rose by a solid 0.8 per cent in the September quarter, consolidating strong growth in the March and June quarters and was 3.6 per cent higher through the year to September 2001. Household consumption has been buoyed by recent declines in interest rates and lower petrol prices.

Private new business investment grew by 1.9 per cent in the September quarter, as new machinery and equipment rose by 2.8 per cent and new investment in non-dwelling buildings and structures rose by 2.2 per cent. Looking forward, there are signs of strengthening business investment, especially in the capital intensive mining sector.

Net exports subtracted slightly from GDP growth in the September quarter, following the 0.4 percentage point contribution to growth in the June quarter. Over the year to the September quarter, net exports contributed a strong 1 percentage point to overall economic growth despite the weakening global economy. Australia's current account deficit was just 1.6 per cent of GDP in the September quarter, around a 20 year low.

Non-farm average earnings (AENA) grew by a moderate 0.6 per cent in the September quarter. AENA increased by 3.9 per cent through the year, which included a one-off half of a percentage point contribution from the increase in the superannuation guarantee charge on 1 July 2000. Other measures of wages growth, such as the Wage Cost Index and enterprise bargaining outcomes, have been relatively steady in recent quarters, pointing to annual wages growth in the 3½ to 4 per cent range.

The September quarter National Accounts also reaffirms the absence of significant inflationary pressures. The household consumption chain price index - a broader measure of consumer prices than the CPI - was unchanged in the September quarter, broadly in line with the very low 0.3 per cent increase in the CPI in the September quarter. Through the year to the September quarter, the household consumption chain price index increased by 2.1 per cent.

The National Accounts measure of profits in the non-financial corporate sector was relatively steady in the September quarter, rising by 0.7 per cent, although down moderately through the year to the September quarter. The profit share of income remains close to its average of the last decade, after reaching an historic high in the September quarter of 2000. In the unincorporated sector, profits rose strongly in the quarter (up 5.7 per cent), reflecting buoyant conditions in the farm and residential construction sectors.

There were increases in production across most sectors, with the strongest increases in construction (up 4.6 per cent), agriculture, forestry and fishing (up 3.0 per cent), finance and insurance (up 2.0 per cent), accommodation, cafes and restaurants (up 1.8 per cent), and manufacturing (up 1.5 per cent).

The 2001-02 Mid-Year Economic and Fiscal Outlook foreshadowed that the Australian economy will not be immune to deteriorating international conditions. Despite risks to the Australian economy from the global economic turmoil, the early signs for the Australian economy in 2001-02 are very encouraging, with continuing strong growth in the September quarter and low inflation. Low interest rates and the extended First Home Owners Scheme will drive further strong growth in housing construction over the months ahead, with spin-off benefits for related parts of the manufacturing sector.

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