NO.094

National Accounts: September Quarter 2001

In the face of an ailing world economy with synchronised downturns in North

America, Europe and Japan, the Australian economy has maintained a very strong

growth momentum through 2001. In seasonally adjusted terms, GDP grew by a robust

1.1 per cent in the September quarter of 2001, building on the strong

growth of 1.8 per cent recorded over the March and June quarters. Growth through

the year to September 2001 was 2.5 per cent. Strong economic growth continues

to be accompanied by low inflation.

The Australian economy remains well on track to markedly outperform most of

the developed economies in 2001. Over the first three quarters of 2001, Australia’s

growth was around five times higher than the average growth for the G7 economies.

Economic growth in the September quarter was bolstered by dwelling investment,

which rose by 13.7 per cent, the largest quarterly increase on record.

Forward indicators for housing construction, such as building approvals and

commencements remain very positive, pointing to further growth in residential

construction in the months ahead.

Household consumption rose by a solid 0.8 per cent in the September

quarter, consolidating strong growth in the March and June quarters and was

3.6 per cent higher through the year to September 2001. Household consumption

has been buoyed by recent declines in interest rates and lower petrol prices.

Private new business investment grew by 1.9 per cent in the September quarter,

as new machinery and equipment rose by 2.8 per cent and new investment in non-dwelling

buildings and structures rose by 2.2 per cent. Looking forward, there are

signs of strengthening business investment, especially in the capital intensive

mining sector.

Net exports subtracted slightly from GDP growth in the September quarter, following

the 0.4 percentage point contribution to growth in the June quarter. Over the

year to the September quarter, net exports contributed a strong 1 percentage point

to overall economic growth despite the weakening global economy. Australia’s

current account deficit was just 1.6 per cent of GDP in the September

quarter, around a 20 year low.

Non-farm average earnings (AENA) grew by a moderate 0.6 per cent

in the September quarter. AENA increased by 3.9 per cent through the

year, which included a one-off half of a percentage point contribution from

the increase in the superannuation guarantee charge on 1 July 2000. Other measures

of wages growth, such as the Wage Cost Index and enterprise bargaining outcomes,

have been relatively steady in recent quarters, pointing to annual wages growth

in the 3½ to 4 per cent range.

The September quarter National Accounts also reaffirms the absence of significant

inflationary pressures. The household consumption chain price index – a broader

measure of consumer prices than the CPI – was unchanged in the September quarter,

broadly in line with the very low 0.3 per cent increase in the CPI in the September

quarter. Through the year to the September quarter, the household consumption

chain price index increased by 2.1 per cent.

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

was relatively steady in the September quarter, rising by 0.7 per cent, although

down moderately through the year to the September quarter. The profit share

of income remains close to its average of the last decade, after reaching an

historic high in the September quarter of 2000. In the unincorporated sector,

profits rose strongly in the quarter (up 5.7 per cent), reflecting

buoyant conditions in the farm and residential construction sectors.

There were increases in production across most sectors, with the strongest

increases in construction (up 4.6 per cent), agriculture, forestry

and fishing (up 3.0 per cent), finance and insurance (up 2.0 per cent),

accommodation, cafes and restaurants (up 1.8 per cent), and manufacturing

(up 1.5 per cent).

The 2001-02 Mid-Year Economic and Fiscal Outlook foreshadowed that the Australian

economy will not be immune to deteriorating international conditions. Despite

risks to the Australian economy from the global economic turmoil, the early

signs for the Australian economy in 2001-02 are very encouraging, with continuing

strong growth in the September quarter and low inflation. Low interest rates

and the extended First Home Owners Scheme will drive further strong growth in

housing construction over the months ahead, with spin-off benefits for related

parts of the manufacturing sector.

CANBERRA

5 December 2001

ATTACHMENT