NO.032

NATIONAL ACCOUNTS: MARCH QUARTER 2002

Today’s National Accounts show that the Australian economy continued to grow

solidly in the March quarter of 2002, adding further to our economic security

and stability. Australia’s GDP increased by 0.9 per cent in the March quarter

and by 4.2 per cent through the year to March 2002, in line with the growth

recorded during 2001. This growth rate markedly exceeds that of any of the world’s

major developed economies.

The March quarter National Accounts also confirm that inflation remains moderate.

Household consumption increased by 1.4 per cent in the March quarter of 2002

and was 4.0 per cent higher than a year ago, making a major contribution

to overall economic growth. Consumer confidence has been maintained at very

high levels in Australia over recent months, supported by low interest rates

and moderate inflation. Robust employment growth in the March quarter of 2002

is likely to have boosted household consumption.

Dwelling investment continued to contribute to overall economic growth in the

March quarter, with quarterly growth of 4.3 per cent. This follows growth of

almost 20 per cent over the preceding two quarters and around 28 per cent over

the year to March. Partial indicators, such as building and finance approvals,

suggest that new dwelling construction is now at or close to its peak. As foreshadowed

in the Budget, dwelling investment is expected to ease over 2002-03 following

strong growth in 2001-02.

Private business investment fell slightly in the March quarter of 2002, but

was up by 3.4 per cent through the year. The most recent ABS survey of capital

expenditure intentions points to a very positive outlook for business investment

in 2002-03, consistent with the Budget forecast for growth of around 12 per

cent.

Net exports contributed 0.3 of a percentage point to GDP growth in the March

quarter. Exports increased by 4.0 per cent, which is the strongest

quarterly growth since the September quarter 2000. The recovery in exports in

the March quarter is consistent with early signs of an economic recovery among

some of Australia’s trading partners. Imports were up by 2.2 per cent in

the March quarter as demand for imports was supported by growth in domestic

spending. Australia’s terms of trade rose by 1.8 per cent in the March quarter,

continuing the upward trend evident since 1998, despite the recent weakness

in the world economy.

The March quarter National Accounts also indicate that inflationary pressures

in the Australian economy remain moderate. The household consumption chain price

index – a broader measure of consumer prices than the CPI – increased by 0.9

per cent in the March quarter (in line with the CPI) and by 2.5 per cent

through the year to March 2002.

Non-farm average earnings increased by a modest 0.4 per cent in the

March quarter and by 3.7 per cent through the year to March. This

outcome is broadly in line with other measures of wages growth, such as the

Wage Cost Index (which increased by 3.1 per cent through the year to the March

quarter) and enterprise bargaining outcomes, and indicates that wages growth

remains relatively steady. At the same time, productivity (measured as GDP per

hour worked) was 4.4 per cent higher through the year to the March

quarter of 2002, ensuring that overall growth in wage costs remains well in

check.

The National Accounts measure of profits in the private non-financial corporate

sector recorded solid growth of 4.6 per cent in the March quarter. Profits were

up by 8.8 per cent through the year to March. Gross mixed income was up by an

exceptional 11.7 per cent through the year to March, boosted by profitability

in the farm sector.

Increases in production were recorded across most sectors of the economy in

the March quarter. Agriculture, forestry and fishing recorded the strongest

growth in production during the March quarter, increasing by 7.5 per cent, which

also provided the largest industry contribution to GDP growth at 0.2 of a percentage

point. Communication services, transport and storage, and retail trade also

posted healthy increases in the March quarter.

The Australian economy has performed very well during a period of global economic

uncertainty and weakness. Going forward, improved prospects for a world recovery

and rising confidence levels will provide continued momentum for the Australian

economy. Exports are likely to strengthen over this period as Australia’s major

trading partners recover, and business investment will become a major driver

of economic growth in 2002-03. This positive outlook will enhance Australia’s

ongoing economic prosperity and security.

CANBERRA

5 June 2002