Peter Costello

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National Accounts: March Quarter 2000


National Accounts: March Quarter 2000

The exceptional performance of the Australian economy has continued in the March quarter, with GDP growth of 1.1 per cent in the quarter and 4.3 per cent through the year. This is the twelfth consecutive quarter of through-the-year growth of 4 per cent or above. Such an outcome has been recorded only once previously from June 1968 to March 1971.

Despite the continued strong growth, the March quarter National Accounts provide further evidence that inflationary pressures remain in check. The household consumption deflator, which is a broad measure of consumer price movements, rose by 0.6 per cent in the March quarter and by just 1.2 per cent through the year. While average earnings growth picked up in the March quarter, this series is very volatile. In trend terms, the increase in average earnings was 1.0 per cent in the quarter and 3.0 per cent through the year. This is in line with other wage indicators, which continue to point to steady wages growth.

After a sustained period of strong growth in 1999, growth in household consumption moderated in the March quarter. Business investment recovered strongly in the March quarter, following a fall in the December quarter, to be 3.6 per cent higher than a year ago. Business investment is expected to respond positively in 2000-01 to lower business costs following the introduction of The New Tax System. Dwelling investment also rose strongly in the March quarter and has increased by 13.8 per cent over the past year. However, recent partial indicators of housing activity indicate that there will be some moderation during the course of 2000-01.

The fall in inventories recorded in the March quarter comes after a lengthy period of strong growth. Some moderation had been expected and is consistent with firms managing down stocks relative to sales to increase profitability.

Net exports subtracted from GDP growth in the March quarter, with a pick up in exports being more than offset by a strong rise in imports. Looking ahead, net exports are expected to make a large contribution to GDP growth in 2000-01 with stronger world growth, some moderation in domestic demand and a boost from the Olympics.

Corporate profits grew strongly by 5.4 per cent in the March quarter, and have increased by 10.0 per cent over the year to the March quarter. Reflecting strong employment growth and higher wages, labour income also grew solidly in the March quarter.

The mining industry recorded very strong growth in the March quarter with new oil fields in the Timor Sea coming on stream. Consistent with the strengthening in dwelling investment, the construction industry also recorded strong growth, as did the agriculture, forestry and fishing sector.

The strong GDP growth in the March quarter means that the Budget forecast for growth of 4 per cent in 1999-2000 is readily achievable and the economy retains considerable momentum going into 2000-01. The prospects for the Australian economy remain very favourable with business investment picking up and net exports expected to contribute to growth in the period ahead, solid employment growth and ongoing inflationary pressures remaining in check. Moreover, The New Tax System will help to further raise the economy’s growth potential through more efficient resource allocation and by providing improved incentives to work, save and invest.

14 June 2000

14 Jun 2000

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