Peter Costello

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National Accounts: March Quarter 2003

NO.048

NATIONAL ACCOUNTS: MARCH QUARTER 2003

Against the weak global environment and the worst drought in a century, today's National Accounts show that Australia's GDP grew by a solid 0.7 per cent in the March quarter 2003, and by 2.9 per cent over the year. The March quarter National Accounts are in line with the Budget forecasts of 3 per cent growth in 2002-03.

The non-farm economy continues to grow solidly, increasing by 0.8 per cent in the March quarter and 4.1 over the year.

The drought is estimated to have subtracted 0.1 of a percentage point from GDP growth in the March quarter and a similar subtraction is expected for the June quarter. The ABS estimates that the drought will reduce agricultural production by 28.6 per cent in 2002-03. The continuing impact of drought, the weak international economy, security concerns and SARS presents downside risks to the Australian economy.

Household consumption grew by 1 per cent in the March quarter with purchases of new motor vehicles rising by a strong 9.9 per cent. Retail trade items grew by 0.7 per cent, despite the impact of the drought on food prices and higher petrol prices.

Private business investment fell by 0.4 per cent in the March quarter, after very strong growth in the December quarter, and grew by 16.7 per cent over the year. New engineering construction rose by a very strong 50 per cent over the year. The most recent ABS survey of capital expenditure intentions points to another year of solid growth in business investment for 2003-04. Dwelling investment declined by 0.7 per cent in the March quarter but remained at high levels. Stocks grew strongly in the quarter.

Net exports subtracted 0.3 of a percentage point from GDP growth in the March quarter. Exports declined by 0.4 per cent, reflecting the ongoing impact of the drought and the weak world economy. Imports rose by 0.6 per cent, in line with growth in domestic spending. The current account deficit narrowed from 6.0 per cent of GDP in the December quarter to 5.3 per cent of GDP in the March quarter.

The National Accounts measure of corporate profits recorded solid growth of 2.2 per cent in the quarter, to be 9.5 per cent higher over the year. Gross mixed income was 4.1 per cent lower over the year, largely reflecting the impact of the drought on farm income. Compensation of employees increased by 1.9 per cent in the quarter, partly reflecting strong employment growth.

The March quarter National Accounts confirm that inflationary pressures in the Australian economy remain moderate. The household consumption chain price index rose by 1.3 per cent in the quarter and 3.1 per cent over the year, broadly in line with the consumer price index.

Notwithstanding the difficult international economy, the Australian economy continues to be one of the strongest growing economies of the developed world.

CANBERRA

4 June 2003

Contact: David Alexander

(02) 6277 7340

4 Jun 2003

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