NO.101

NATIONAL ACCOUNTS: SEPTEMBER QUARTER 2003

Today’s National Accounts show that Australia’s economic growth

rebounded very strongly in the September quarter, growing by 1.2 per cent

in the quarter and by 2.6 per cent over the year. Domestic demand continues

to retain significant momentum, underpinned by strong growth in business

investment and consumer spending. The National Accounts also provide further

evidence that inflationary pressure remains in check.

The ABS estimates that farm production rebounded by 17.3 per cent in the

September quarter, contributing 0.4 of a percentage point to overall economic

growth. However, this increased production will not be reflected in rural

exports until at least the December quarter. The non-farm economy grew by

0.8 per cent in the September quarter and 2.8 per cent over the

year.

Private business investment grew by 2.1 per cent in the September quarter

and 10.8 per cent over the past year. New machinery and equipment investment

grew by 3.9 per cent in the quarter and a very strong 11.5 per cent over

the year. The most recent ABS survey of capital expenditure intentions points

to another year of solid growth in business investment in 2003–04,

with investment intentions particularly strong for buildings and structures.

Strong investment by the business community reflects the favourable investment

environment in Australia, with low interest rates, high levels of capacity

utilisation and strong corporate profitability.

Robust growth in domestic demand in the September quarter was underpinned

by consumer activity, with household consumption increasing by 1.7 per cent

in the quarter and by 4.4 per cent over the year. Consumer spending

has been supported by strong growth in employment, steadily increasing wealth,

the 2003–04 Budget income tax cuts, and high levels of consumer

confidence.

Dwelling investment rose by 2.6 per cent in the September quarter, maintaining

activity at high levels, following very strong growth in the dwelling sector

over the past couple of years.

Strong domestic spending in the face of weak — albeit recovering

— international demand saw the external sector subtract 0.5 of a percentage

point from economic growth in the September quarter. Exports grew by 1.5

per cent, with travel services rising by 15.4 per cent as the tourism sector

rebounded from a slump in the June quarter in the wake of the SARS epidemic

and the war in Iraq. Strong domestic demand saw imports rise by 3.1 per cent

in the quarter.

The National Accounts confirm Australia’s low inflation environment.

The household consumption chain price index rose by 0.3 per cent

in the quarter and 1.6 per cent over the year, a little below

movements in the consumer price index. Non-farm average earnings increased

by 3.3 per cent over the year, consistent with outcomes for the wage cost

index.

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

sector grew by 1.6 per cent in the September quarter, to be 3.5 per

cent higher over the year. The profit share as a proportion of the economy

rose to 25.1 per cent, as high as has been previously recorded.

The Australian economy is well positioned to maintain solid growth over

the period ahead, with domestic demand retaining significant momentum, underpinned

by historically high levels of consumer and business confidence. Moreover,

Australia’s external sector should benefit in coming months from improving

weather conditions and a recovery in Australia’s major trading partners,

although the recent appreciation of the exchange rate will continue to be

a drag on the sector overall. The continuing strong performance of the Australian

economy reflects prudent economic management and commitment to a broad range

of structural reforms.

CANBERRA

3 December 2003

Contact: David Alexander

02 6277 7340