Today's National Accounts reaffirm Australia's position as one of the strongest economies in the world, and shines a light on our ongoing resilience in the face of significant international headwinds.
Gross Domestic Product rose by a solid 0.6 per cent in the June quarter, which builds upon exceptional growth in the March quarter, revised up to 1.4 per cent. This takes Australia's growth performance to a robust 3.7 per cent through the year.
The National Accounts show the Australian economy grew faster than every single major advanced economy both in the June quarter and over the year to June, and has successfully completed a stunning 21 consecutive years of economic growth – a feat not matched by any other advanced economy over this period.
Australia's economic performance in the June quarter was even more impressive against a backdrop of worsening global conditions, including a contraction in the euro area, moderating growth in the United States and the return of financial market turbulence.
Encouragingly, Australia's economic growth was broad-based in the June quarter, with positive contributions from consumption, business investment, public final demand and net exports.
Household consumption rose 0.6 per cent in the June quarter and at an above-trend rate of 4.0 per cent through the year, despite the weak global environment continuing to weigh on consumer confidence. Consumption was underpinned by strong growth in household incomes, supplemented by the Government's Schoolkids Bonus and Clean Energy Household Assistance, with payments to households totalling $2.8 billion in the June quarter. Households also continued to strengthen their balance sheets, with the household saving ratio rising to 9.2 per cent.
New business investment continued to strengthen, rising 0.9 per cent in the quarter to be 21.2 per cent higher over the year. New engineering construction continues to be the standout, growing 0.9 per cent in the quarter and a remarkable 60.0 per cent over the year – its fastest annual growth in over 30 years. Growth in engineering construction has been underpinned by projects underway in the resources sector.
New business investment, as a share of GDP, is at its highest level in 40 years and is expected to continue growing through 2012-13. The Australian Bureau of Statistics' Private New Capital Expenditure and Expected Expenditure (CAPEX) survey released last week reported that businesses expect to spend a record $182 billion this financial year, an increase of around 20 per cent from the corresponding estimate for 2011‑12.
Expected capital expenditure for the mining industry in 2012-13 is $119 billion, which is more than 40 per cent higher than the corresponding estimate for 2011-12. There is still more to come, with the Bureau of Resources and Energy Economics estimating that the pipeline of resources projects is worth around half a trillion dollars. While investment is lumpy quarter on quarter due to the large size of projects in the resources sector, the investment pipeline will continue to support strong and sustained growth in business investment.
While recent falls in global commodity prices have weighed on some investment decisions, more than half of the resources investment pipeline is at an advanced stage, standing at a record $260 billion according to the Bureau of Resources and Energy Economics. The value of resources projects that have progressed to an advanced stage has increased almost $90 billion in the past year alone. This means that the overall investment pipeline is more resilient to ongoing global volatility, providing ongoing support for our economy in these uncertain global times.
Resources investment will drive strong and enduring growth in Australia's commodity exports, with the results of this growth already becoming evident. Increased shipments of non-rural and rural commodities drove 2.5 per cent growth in exports in the June quarter and an impressive 6.6 per cent growth through the year.
Imports rose 0.9 per cent in the June quarter to be 9.1 per cent higher over the year. The key drivers of imports growth in the quarter were capital and intermediate goods, consistent with the strength of new business investment.
Public final demand rose 1.9 per cent the June quarter and 2.4 per cent over the past year. One of the key drivers of growth was public non-financial corporations, underpinned by investment in rail and energy infrastructure in addition to the roll out of the National Broadband Network.
Dwelling investment fell a further 1.7 per cent in the June quarter, although there are tentative signs that housing construction activity may stabilise in the second half of the year, supported by low interest rates and rising household incomes.
As expected, Australia's terms of trade fell 0.6 per cent in the June quarter to be 7.1 per cent lower through the year. While higher import prices drove the quarterly fall, export prices were down 4.7 per cent over the year to June. Continued weakness in the major advanced economies and more moderate growth in emerging Asia have tempered demand for energy and steel inputs. Coinciding with continued strong growth in supply, this has led to recent falls in coal and iron ore prices.
Notwithstanding the likelihood of further cyclical demand fluctuations in the future, the medium-term outlook is still for Australia's terms of trade to remain above historical norms, underpinned by continued strong demand in our region.
Weak global conditions, lower commodity prices, the high Australian dollar and cautious household spending behaviour are weighing on corporate profitability. Private non-financial corporate gross operating surplus fell 0.6 per cent in the quarter and while gross mixed income rose 1.5 per cent, it remains lower over the year.
Compensation of employees increased 1.4 per cent in the quarter, reflecting moderate growth in both employment and average earnings.
While global economic conditions are likely to remain difficult for some time to come, today's National Accounts demonstrate again our economic resilience and should give us confidence in the fundamental strengths of our economy as it completes 21 consecutive years of growth.