Peter Costello

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National Accounts: September Quarter 2003



Today’s National Accounts show that Australia’s economic growth rebounded very strongly in the September quarter, growing by 1.2 per cent in the quarter and by 2.6 per cent over the year. Domestic demand continues to retain significant momentum, underpinned by strong growth in business investment and consumer spending. The National Accounts also provide further evidence that inflationary pressure remains in check.

The ABS estimates that farm production rebounded by 17.3 per cent in the September quarter, contributing 0.4 of a percentage point to overall economic growth. However, this increased production will not be reflected in rural exports until at least the December quarter. The non-farm economy grew by 0.8 per cent in the September quarter and 2.8 per cent over the year.

Private business investment grew by 2.1 per cent in the September quarter and 10.8 per cent over the past year. New machinery and equipment investment grew by 3.9 per cent in the quarter and a very strong 11.5 per cent over the year. The most recent ABS survey of capital expenditure intentions points to another year of solid growth in business investment in 2003–04, with investment intentions particularly strong for buildings and structures. Strong investment by the business community reflects the favourable investment environment in Australia, with low interest rates, high levels of capacity utilisation and strong corporate profitability.

Robust growth in domestic demand in the September quarter was underpinned by consumer activity, with household consumption increasing by 1.7 per cent in the quarter and by 4.4 per cent over the year. Consumer spending has been supported by strong growth in employment, steadily increasing wealth, the 2003–04 Budget income tax cuts, and high levels of consumer confidence.

Dwelling investment rose by 2.6 per cent in the September quarter, maintaining activity at high levels, following very strong growth in the dwelling sector over the past couple of years.

Strong domestic spending in the face of weak — albeit recovering — international demand saw the external sector subtract 0.5 of a percentage point from economic growth in the September quarter. Exports grew by 1.5 per cent, with travel services rising by 15.4 per cent as the tourism sector rebounded from a slump in the June quarter in the wake of the SARS epidemic and the war in Iraq. Strong domestic demand saw imports rise by 3.1 per cent in the quarter.

The National Accounts confirm Australia’s low inflation environment. The household consumption chain price index rose by 0.3 per cent in the quarter and 1.6 per cent over the year, a little below movements in the consumer price index. Non-farm average earnings increased by 3.3 per cent over the year, consistent with outcomes for the wage cost index.

The National Accounts measure of profits in the private non-financial corporate sector grew by 1.6 per cent in the September quarter, to be 3.5 per cent higher over the year. The profit share as a proportion of the economy rose to 25.1 per cent, as high as has been previously recorded.

The Australian economy is well positioned to maintain solid growth over the period ahead, with domestic demand retaining significant momentum, underpinned by historically high levels of consumer and business confidence. Moreover, Australia’s external sector should benefit in coming months from improving weather conditions and a recovery in Australia’s major trading partners, although the recent appreciation of the exchange rate will continue to be a drag on the sector overall. The continuing strong performance of the Australian economy reflects prudent economic management and commitment to a broad range of structural reforms.

3 December 2003

Contact: David Alexander
02 6277 7340

3 Dec 2003

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