Peter Costello

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National Accounts: June Quarter 2002

NO.051

 

EMBARGO: 11:30 AM (AEST) Tuesday 3 September 2002

NATIONAL ACCOUNTS: JUNE QUARTER 2002

Today's National Accounts show that the Australian economy continued to post solid gains in the June quarter of 2002, despite the weak global environment. Australian GDP grew by 0.6 per cent in the June quarter and by 3.8 per cent through the year to June.

Through the year to the June quarter 2002, Australia's GDP growth was more than twice the growth rate recorded by the developed world. Growth was underpinned by investment spending and very strong productivity growth.

In year-average terms, Australian GDP grew by 3.8 per cent in 2001-02, in line with the Budget forecast of 3¾ per cent growth.

Household consumption increased by 1.5 per cent in the June quarter of 2002, adding to the strong growth of 1.3 per cent in the March quarter. In year-average terms, household consumption grew by 3.9 per cent in 2001-02 and was a key driver of overall economic growth. Household consumption has been buoyed by healthy consumer confidence, moderate inflation, low interest rates and the pickup in residential construction activity over 2001-02.

Dwelling investment ended 2001-02 on a strong note, growing by 4.8 per cent in the June quarter, to be around 30 per cent higher than a year ago. Recent leading indicators of dwelling construction point to activity being close to its peak. As foreshadowed in the Budget, dwelling investment is expected to ease over coming quarters.

Business investment increased by 8.1 per cent in the June quarter of 2002, to be 15.8 per cent higher than a year ago. Investment in new equipment grew by 6.5 per cent in the June quarter, to be up by a very strong 15.2 per cent through the year to June. Investment in new buildings and structures increased by 7.3 per cent in the June quarter, after growth of around 13 per cent in the previous quarter. These strong outcomes are consistent with the most recent ABS survey of capital expenditure intentions, which points to a very positive outlook for business investment in 2002-03, particularly in the mining and transport industries.

Increases in production were recorded across most sectors of the economy in the June quarter. Construction recorded the strongest growth in production in the quarter, increasing by 5.8 per cent, which also provided the largest industry contribution to GDP growth at 0.3 of a percentage point. Accommodation, cafes and restaurants also increased solidly in the June quarter, with growth of 3.4 per cent. The National Accounts measure of profits in the private non-financial corporate sector declined by 2.2 per cent in the June quarter, but profits were up by a very strong 12.3 per cent through the year to June.

The National Accounts measure of agricultural production fell by 2.2 per cent in the June quarter, mainly due to lower production of rice and cotton. While agricultural incomes rose 80 per cent over the last two years, incomes will be adversely affected by drought, which will have a substantial effect on farm production in 2002-03.

Turning to the external sector, exports increased marginally in the June quarter, moderating from the strong 3.0 per cent growth in the March quarter. Imports grew by 6.0 per cent in the June quarter, driven mainly by imports of capital equipment and consumer durables, reflecting the strength in the Australian economy. Overall, net exports subtracted 1.3 percentage points from GDP growth in the June quarter 2002. Australia's terms of trade fell by 0.6 per cent in the quarter, but increased by 2.8 per cent through the year to June 2002, despite the weak world economy.

The June quarter National Accounts show that inflationary pressures in the Australian economy remain moderate. The household consumption chain price index - a broader measure of consumer prices than the CPI - increased by 0.6 per cent in the June quarter (in line with the CPI) and by 2.2 per cent through the year to June 2002.

The National Accounts provide further evidence that wages growth remains moderate. Non-farm average earnings increased by 3.2 per cent through the year to June. This outcome is broadly in line with other measures of wages growth, such as enterprise bargaining outcomes and the Wage Cost Index, which point to wages growth remaining steady at moderate levels. In year average terms productivity (measured as GDP per hour worked) grew by 4.1 per cent in 2001-02 and was 2.8 per cent higher through the year to the June quarter of 2002. Very strong productivity growth, combined with steady wages growth, is helping to ensure that overall growth in labour costs remains in check.

The performance of the Australian economy is in stark contrast to the continued weak global economic and financial conditions, where risks have intensified in recent months. The Australian economy continues to perform strongly, as it did through the Asian financial crisis and the US recession in 2001. Australia is set to continue as one of the strongest growing economies in the developed world in 2002 and 2003.

CANBERRA

3 September 2002

3 Sep 2002

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