6 June 2018

National Accounts – March Quarter 2018


Today's National Accounts show that the Turnbull Government's plan for a stronger economy is working, and we need to stick to that plan.

At the last election we said we would deliver jobs and growth. And that is exactly what has been delivered.

More than 1 million jobs have been created since we came to office in 2013, and last calendar year was the strongest jobs growth on record, with more than 1,000 jobs created on average every day.

According to the Australian Bureau of Statistics, our economy grew by 1.0 per cent in the March quarter to be 3.1 per cent higher than a year ago. This is the strongest annual growth rate in around two years and is above the long-run average.

Australia has climbed back to the top of the global leaderboard, leading the major advanced economies of the world, bettering the average growth of the OECD and all G7 nations once again.

Importantly, today's results validate our budget forecasts and confirm the strengthening economic outlook we presented in the Budget just a few weeks ago.

Today's figures show growth was broad-based with all components contributing to growth in the quarter, including household consumption, new public final demand and net exports.

Over 1 million jobs have been created under the Coalition Government and having more Australians in work is having a great impact on our economy.

Household consumption grew by 0.3 per cent in the quarter and is 2.9 per cent higher than a year ago. This has been driven by increases in 15 of the 17 consumption categories over the past year. Over half of our annual growth has been driven by household consumption.

As the economy strengthens and households continue to do their part for the economy, the Turnbull Government remains committed to back them in by providing targeted tax relief through our Personal Income Tax Plan for lower, fairer and simpler taxes.

This plan is rightfully designed to provide initial support for lower and middle-income earners who have done so much to support the economy as it transitions out of the mining investment boom.

As our economy has grown and the labour market has strengthened, what we are paid, or compensation of employees, has improved. Compensation of employees recorded solid growth of 1.2 per cent in the quarter and is up 5.1 per cent over the year. This is the strongest annual result seen in almost six years.

Over 40 per cent of the increase in the quarter and around a third of the annual increase is being driven by employees earning more – or an increase in average wages. Today's results show that not only are more Australians in jobs – they are earning more in those jobs.

Australians have worked for this increase in income and this Government is committed to ensuring they keep more of it.

The growth in jobs has been driven by non-mining businesses, who are investing and expanding, taking advantage of some of the best reported business conditions on record.

We need them to keep doing this and that is why we need to lower corporate taxes to remain competitive.

There is finally momentum in non-mining business investment and we must create the right environment for this to continue.

Treasury estimates that new non-mining business investment grew by 1.8 per cent in the quarter and 10.0 per cent through the year. Non-mining investment has grown for eight consecutive quarters – the longest continuous growth since before the start of the mining investment boom.

New machinery and equipment investment grew for the fourth consecutive quarter to be 9.3 per cent higher than a year ago. This is the highest annual growth rate since the peak of the mining investment boom in 2012 and twice the long run average and is being driven by utes and other commercial vehicles.

Growth has also been supported by the Government getting on with the job on infrastructure development and delivering the key services that Australians rely on. New public final demand rose by 1.5 per cent in the quarter to be 5.6 per cent higher through the year.

Following the drag from last quarter, net exports bounced back in the quarter contributing 0.3 percentage points to growth.

Exports were up 2.4 per cent in the quarter to be up 4.6 per cent over the year – with strength seen in our mining and services exports.

Imports were up 0.5 per cent in the quarter – encouragingly a lot of this came through capital imports, in line with the momentum in non-mining business investment.

Today's result show why the Coalition Government remains focussed on gaining greater access to international markets for our local exporters.

Turning to the income side, nominal GDP – which plays an important role in the Budget – also remains on track, growing 2.2 per cent in the quarter to be 3.9 per cent higher than a year ago.

Looking at the overall performance of our companies during the quarter, corporate profits were up 5.0 per cent, with strong contributions from both non-mining and, particularly, mining profits. However, this strength in mining profits cannot be taken for granted and the Government continues to maintain a prudent assumption for commodity prices.

Stronger profits allow Australian businesses to invest more and employ more Australians.

As noted previously, compensation of employees has risen strongly – up 1.2 per cent in the quarter and up 5.1 per cent through the year. In annual terms, corporate profits and wages and salaries are growing at broadly similar rates.

Overall household gross disposable income grew by 0.7 per cent in the quarter to be 2.8 per cent higher over the year, while the household saving ratio ticked down to 2.1 per cent.

Overall, this is a very sound set of numbers and that comes down to hard working Australians who are out there each and every day giving it their all.

The Coalition Government's economic plan is focussed on backing these results in and creating more opportunities for Australians to get a job, earn more, spend more and invest more.