NO.089

The sustained strong performance of the Australian economy continued in the June

quarter, with GDP growth of 0.7 per cent in the quarter and 4.7 per cent through the

year with minimal inflationary pressure.

This is the thirteenth consecutive quarter of through-the-year growth of 4 per cent or

above, an outcome unprecedented in the history of the Quarterly National Accounts

(compiled since 1959).

In year-average terms, growth in 1999-2000 was a very strong 4.4 per cent, slightly

above the 2000-01 Budget estimated outcome of 4 per cent. The firm trend in the June

quarter means that the economy retained considerable momentum going into 2000-01.

In particular, growth will be supported by exports, which increased 29 per cent in

value over the year to June 2000 compared to import growth of 21 per cent.

Despite continued strong economic growth, rising employment and declining unemployment,

the June quarter National Accounts provides evidence that inflation and wage pressures

remain well in check. The household consumption deflator, which is a broader measure of

consumer prices than the Consumer Price Index, rose by 0.5 per cent in the June

quarter and by just 1.4 per cent through the year to the June quarter.

The National Accounts measure shows wages were unchanged in the June quarter, to be 2.9

per cent higher than the level a year ago. This is in line with other wages measures which

point to wages increasing at a moderate rate with little sign of acceleration.

After moderating in the March quarter, household consumption grew by a solid

0.9 per cent in the June quarter. The rebound in the June quarter can be partly

attributed to a small bring-forward in household expenditure ahead of the introduction of The

New Tax System.

Business investment declined in the June quarter but remained 3.7 per cent above the

levels of a year ago. Looking ahead, the outlook for business investment is positive,

supported by rising business and consumer confidence and the beneficial impact of lower

business costs associated with the introduction of The New Tax System.

Dwelling investment continued to grow rapidly in the June quarter, increasing by 10 per

cent following growth of more than 6 per cent in the March quarter. Over the year to the

June quarter, dwelling investment increased by a very strong 23 per cent, partly

reflecting some bring-forward in dwelling activity ahead of the introduction of The New

Tax System. Recent leading indicators of housing activity point to a decline in

activity in this sector in coming quarters.

Net exports contributed 0.3 percentage points to GDP growth in the June quarter, a

significant turn around from the March quarter. Net exports are expected to make a

significant positive contribution to GDP growth in 2000-01 for the first time since the

Asian economic crisis. Export growth will be supported by strong world growth, the lower

exchange rate and a boost from the Sydney Olympics.

Corporate profits in the non-financial sector, as measured in the National Accounts,

were largely unchanged in the June quarter following strong growth of around 8 per cent in

the March quarter. This measure of corporate profits increased by more than

14 per cent over the year to the June quarter. Labour income continued to grow

solidly in the June quarter, rising 1.4 per cent, reflecting continued strong

employment growth. Average non-farm earnings were unchanged in the quarter.

Strong growth was recorded in the retail and construction sectors, partly reflecting

the bring-forward in expenditure associated with the introduction of The New Tax System.

The mining sector also continued its strong growth of the previous quarter, reflecting

higher commodity prices and strong world demand for minerals.

The prospects for the Australian economy remain very favourable with business

investment set to increase, continued positive contributions from net exports, solid

employment growth and ongoing inflationary pressures remaining in check. The smooth

introduction of The New Tax System will help to ensure that the current

economic expansion extends into its tenth year.

CANBERRA

13 September 2000