NO.078

NATIONAL ACCOUNTS: JUNE QUARTER 2004

Today’s National Accounts show the Australian economy continues its

solid run growing by 0.6percent in the June quarter 2004, to be 4.1percent

higher through the year.

Domestic demand retains significant momentum, supported by historically

high levels of consumer confidence, record corporate profitability and robust

employment growth. Australia’s export performance continues to improve

in line with the stronger world economy and the recovery from the drought.

The sharply rising terms of trade are contributing significantly to domestic

incomes.

Australia’s economic growth continues to be supported by moderate

wage increases and low inflation.

In 2003-04, the Australian economy grew by 3.6percent in year-average

terms, consistent with the Budget forecasts of 3percent.

Following several quarters of strong growth, farm

production fell by 7.3percent in the Junequarter, but was 35.7percent

higher through the year. The large grain harvest in 2003-04 provided support

to rural commodity exports, which increased by 40.6percent through the

year. However, the outlook for farm production remains uncertain given the

increased chance of below-average rainfall over much ofAustralia’s farming

regions.

Domestic demand grew strongly with household consumption

increasing by 1.1percent in the June quarter and 6.1percent

through the year. Household consumption continues to be supported by high

levels of consumer confidence, robust employment growth and the Government’s

recently announced Budget measures.

Private business investment increased by 4.9percent in the June quarter,

with activity remaining at very high levels. Business investment in Australia

has been underpinned by solid exports growth, high levels of capacity utilisation,

and healthy corporate profitability. The National Accounts measure of private

non-financial corporate profits grew by 11.1percent in the Junequarter,

to be 16.4percent higher through the year.

Dwelling investment increased by 1.1percent in

the June quarter. Investment in new dwellings rose by 0.2percent in the

June quarter and investment in additions and alterations increased by 2.2percent.

However, the pace of growth has begun to ease and forward indicators of

dwelling investment point to a moderation in activity over the coming quarters.

Exports rose by 1.8percent in the June quarter,

underpinned by the recovery in rural commodity exports. Robust domestic

demand led to a 2.0percent increase in imports. The external sector detracted

0.1percentage points from economic growth. Rising bulk commodity prices

and falling import prices have seen Australia’s terms of trade rise

by 11.2percent through the year to June — the strongest increase

since 1989 — adding significantly to domestic incomes.

The National Accounts provide further evidence that

wage and inflationary pressures in the Australian economy remain contained.

The household consumption chain price index rose by 0.2percent in the

quarter, to be 1.8percent higher through the year. Non-farm average earnings

increased by 0.2percent in the June quarter, weaker than the increase

in the Wage Cost Index over the same period.

The performance of the Australian economy over recent years is a story

of sustained economic growth and low inflation. Strong economic fundamentals

continue to drive growth in domestic demand, supported by the Government’s

commitment to responsible economic management and its programme of ongoing

reforms. The strong world economy leaves the Australian economy well positioned

to maintain solid growth over the period ahead.

CANBERRA

1 September 2004

Contact: David Alexander

02 6277 7340