NO.056

NATIONAL ACCOUNTS – MARCH QUARTER 2006

National Accounts data released this morning by the Australian Bureau of Statistics (ABS) show solid and sustained economic growth. GDP increased by 0.9 per cent in the March quarter to be 3.1 per cent higher than a year ago. Growth in the quarter reflected solid household consumption and growth in business investment and exports, partially offset by a fall in dwelling investment.

National income growth remains robust, with real gross domestic income increasing by 0.7 per cent in the March quarter to be 5.1 per cent higher through the year. The terms of trade fell by 0.9 per cent, after reaching a near‑record level in the December quarter.

Household consumption growth remains moderate. Household consumption grew by 0.9 per cent in the March quarter to be 2.9 per cent higher through the year. Dwelling investment fell by 2.5 per cent in the quarter to be 2.3 per cent lower through the year. The current contraction in dwelling investment is moderate by historical standards, reflecting an orderly adjustment in the housing market.

Growth in business investment was modest in the March quarter, following very strong growth over the previous three quarters. New machinery and equipment investment grew by 1.5 per cent, to be 27.1 per cent higher through the year. New private engineering construction investment fell by 3.4 per cent in the quarter, but remains 13.8 per cent higher through the year. Mining investment has been particularly strong, and according to the recent ABS CAPEX survey has almost doubled over the past year.

The outlook for business investment is supported by strong corporate profitability and balance sheets, and high levels of capacity utilisation. Corporate gross operating surplus, the national accounts measure of profits, increased by 0.7 per cent in the quarter to be 11.0 per cent higher than a year ago. The profit share was 27.1 per cent, and remains near record high levels.

Exports grew by 0.5 per cent in the March quarter, and imports by 0.4 per cent. Rural exports grew by 6.0 per cent, but were offset by a 3.2 per cent fall in non‑rural commodities. The fall in non‑rural commodity exports reflected the effects of tropical cyclones Clare and Glenda, which struck the North‑West Shelf and Pilbara regions of Western Australia in January and March. Export growth is expected to increase over the period ahead reflecting substantial investment in the mining sector.

Good seasonal rains through the second half of 2005 have led to strong growth in the farm sector. However, dry conditions persist in some regions. Farm GDP rose by 2.7 per cent in the quarter, to be 4.2 per cent higher through the year.

The household consumption chain price index increased by 1.2 per cent in the March quarter to be 2.8 per cent higher through the year. Consistent with the recent CPI release, a major factor behind the increase in consumer prices over the past 12 months has been the increase in petrol prices.

Robust profits are contributing to a high level of business investment. This is providing a basis for future economic growth and increasing employment. The Government remains committed to sensible economic reforms and prudent budget management to ensure that these positive economic outcomes continue.

7 June 2006

MELBOURNE

Contact: David Alexander

(03) 9650 0244