Today's National Accounts show that the Australian economy has been the best performing advanced economy over the past year and the only advanced economy that has recorded positive growth over this period.
Today's data shows that Australia continues to avoid a technical recession – unlike all major advanced economies during this historic global downturn.
GDP rose by 0.6 per cent in the June quarter to be 0.6 per cent higher through the year. The solid performance of the Australian economy comes at a time of continuing weakness in many parts of the world. The G7 economies contracted by an average of 4.6 per cent in the year to the June quarter, with the US, UK and Japan recently experiencing their biggest yearly falls in output in 50 years.
The National Accounts confirm that the Government's economic stimulus is playing a vital role in supporting growth and jobs in the Australian economy. Treasury estimates that without the Government's economic stimulus, the economy would have contracted for its third consecutive quarter, with GDP falling by 1.3 per cent over the year to the June quarter.
Household consumption spending rose 0.8 per cent in the quarter, underpinned by the Government's stimulus payments, contributing 0.5 percentage points to quarterly GDP growth.
Private investment remained weak, with sharp falls in construction activity. Non-residential building activity fell sharply in the quarter, offsetting a rise in new engineering construction. However, overall new business investment rose by 2 per cent in the quarter, with machinery and equipment investment boosted by the Small Business and General Business Tax Break. Without the stimulus support, Treasury estimates that new business investment would have contracted in the quarter.
The weakness in private investment continues to underscore the importance of the Government's nation-building investments, with the initial stages of the Government's investment stimulus contributing to a 0.8 per cent rise in public investment in the quarter.
Dwelling investment declined in the quarter, falling by 5.5 per cent. However low interest rates and the First Home Owners Boost are working to support activity and employment in the sector, which remain stronger than in most comparable countries.
The weak global economy is continuing to have a substantial impact on Australia's export sector.
While export volumes increased by 1 per cent in the quarter, supported by increased demand from China, the global recession is having its biggest impact through export prices. Export prices fell by 15.8 per cent in the quarter, following falls of nearly 10 per cent in the previous quarter. This is the largest quarterly decline in 50 years, and has stripped nearly $11 billion from export earnings in the quarter. The terms of trade fell by 7.4 per cent in the quarter, bringing the cumulative fall to 16.8 per cent.
The effects of the falling terms of trade are being felt in lower aggregate prices and lower incomes. The GDP deflator – the index of prices of goods and services produced in the economy – fell by 2.1 per cent in the quarter and nominal GDP fell by 1.5 per cent. This is the sharpest quarterly contraction in nominal GDP since 1961. Corporate profits fell by 6.2 per cent in the quarter, gross mixed income fell by 1.4 per cent, and wages and salaries fell by 0.3 per cent.
Today's National Accounts paint a picture of a still weak but very resilient Australian economy. The Government's stimulus is working to support jobs, build confidence, and invest in infrastructure for the future, but the job is clearly still not over. The Government's economic stimulus is still needed to support activity and jobs. However the prospect of a gradual pickup in private sector activity will allow the staged withdrawal of the stimulus to proceed from the December quarter this year, as foreshadowed in the 2009-10 Budget.