NO.087

National Accounts ‑ June Quarter 2007

National Accounts data released this morning by the ABS show strong and sustained economic growth.  GDP increased by 0.9 per cent in the June quarter to be 4.3 per cent higher through the year. 

While the farm sector was severely affected by the drought during 2006‑07, the non‑farm economy grew strongly.  In year average terms farm GDP fell by 19.2 per cent in 2006‑07, while the non-farm economy grew by 3.9 per cent.  The strength in the non-farm economy was broadly based, and supported by strong growth in national income.

Household consumption expenditure grew by 0.6 per cent in the June quarter, following strong growth in the March quarter, to be 3.9 per cent higher through the year.  Dwelling investment fell by 0.2 per cent in the June quarter, but remains 3.7 per cent higher through the year.  Investment in new and used dwellings fell by 0.7 per cent in the quarter, partially offset by a 0.3 per cent rise in alterations and additions.

New business investment grew by a strong 4.6 per cent in the June quarter to be 13.3 per cent higher through the year.  Strong growth was recorded in both engineering construction and machinery and equipment investment.  New engineering construction grew by 6.6 per cent in the quarter to be 28.5 per cent higher through the year.  New machinery and equipment investment increased by 5.9 per cent in the quarter, and is 11.5 per cent higher through the year.  The outlook for business investment remains positive, with around $23 billion worth of engineering construction projects having been commenced but not yet completed.

Strong business investment is being supported by strong business profits.  While business profits, as measured by private non-financial gross operating surplus, fell by 1.5 per cent in the June quarter, they remain 16.8 per cent higher through the year.

Public investment also grew strongly, increasing by 15.4 per cent in the quarter to be 16.5 per cent higher through the year.

Net exports subtracted 0.2 of a percentage point from GDP growth in the June quarter.  Exports increased by 0.8 per cent, while imports increased by 1.1 per cent.  The growth in exports was led by resources exports, which increased by 1.3 per cent in the quarter.  The drought continued to affect rural exports, with a fall of 1.7 per cent in the quarter and 12.8 per cent through the year.  The terms of trade fell by 0.1 per cent in the quarter, but remain 6.2 per cent higher through the year.

The National Accounts continue to show moderate inflation.  The household consumption chain price index increased by 1.1 per cent in the June quarter to be 2.2 per cent higher through the year.  This is consistent with the 2.1 per cent growth in the Consumer Price Index over the same period.

Average non-farm compensation per employee increased by 2.1 per cent in the quarter to be 5.6 per cent higher through the year.  This was somewhat stronger than the Wage Price Index, the ABS’ preferred measure of wage growth, which rose by 4.0 per cent through the year to the June quarter 2007.  This index is not affected by compositional changes and bonuses. 

Labour productivity in the market sector strengthened in the quarter, increasing by 1.2 per cent to be 3.0 per cent higher through the year in trend terms (2.9 per cent seasonally adjusted).  Labour productivity in the market sector is growing well above the long-term average of 2¼ per cent.

With the release of the June quarter National Accounts, the economy recorded its sixteenth consecutive year of economic growth.  The unemployment rate is around 32-year lows, a record proportion of the working age population is employed, and inflation remains contained.  Over the past six years, new business investment has grown by almost 115 per cent.  This has dramatically increased the capacity of the economy, and is beginning to be reflected in strong output and productivity growth.  While the economic outlook remains positive, the recent turbulence in global financial markets will continue to require careful and experienced management.

CANBERRA

4 September 2007

Contact: David Gazard – 02 6277 7340