NO.078

NATIONAL ACCOUNTS – JUNE QUARTER 2005

Today’s National Accounts release shows economic growth

in Australia strengthening, with GDP increasing by 1.3 per cent in the June

quarter 2005 to be 2.6 per cent higher through the year. Real gross domestic

income rose by a very strong 4.6 per cent through the year to the June quarter,

supported by sharp increases in the prices of a number of Australia’s

major export commodities.

Household consumption grew by 0.7 per cent in the June quarter,

continuing the moderate consumption growth experienced through 2004 05. Favourable

labour market conditions and solid wage growth should contribute to household

consumption growth over coming months, as will the tax cuts and increased support

for families announced in the 2005 06 Budget. In contrast, sustained high petrol

prices have been a burden on the budgets of Australian households recently and

this is likely to continue as oil prices remain high into 2005 06.

Dwelling investment grew by 3.3 per cent in the June quarter,

after falling for the past three quarters. Despite the pick-up in dwelling investment

in the June quarter, leading indicators suggest that housing activity will remain

relatively subdued over coming quarters, as the market consolidates from the

exceptionally high levels of activity recorded in recent years.

Strong profits growth, sound corporate balance sheets and high

levels of capacity utilisation continue to support business investment. Both

machinery and equipment investment and building investment increased in the

June quarter, contributing to a 6.2 per cent increase in total business investment.

Corporate gross operating surplus grew strongly in the June quarter, reflecting

buoyant profits in the mining sector, and these higher profit levels should

remain while commodity prices are high.

Net exports subtracted 0.2 of a percentage point from GDP growth

in the June quarter, following a subtraction of 0.4 of a percentage point in

the March quarter. Imports grew by 2.0 per cent in the June quarter, while exports

grew by 1.6 per cent.

Nominal GDP rose by 2.9 per cent in the June quarter, boosted

by a 5.8 per cent increase in the terms of trade. This was the highest quarterly

growth in the terms of trade since the September quarter 1988, and reflected

strong gains in the prices of coal, and metal ores and minerals. Consumer price

inflation remains moderate, with the household consumption chain price index

increasing by 0.3 per cent in the June quarter and 1.7 per cent through the

year.

The outlook for the Australian economy is positive, with the unemployment rate

of 5 per cent near a 30-year low and interest rates and inflation remaining

low by historical standards. The Government’s prudent budget management

and focus on sensible economic reform will continue to provide a strong basis

for sustainable economic growth that delivers strong profits for Australian

businesses and more jobs and higher wages for Australian workers.

7 September 2005

CANBERRA

Contact: Matthew Doman

02 6277 7400