Thanks to the government stimulus spending, Australia has escaped another quarter of recession.
The September quarter national accounts from the Australian Bureau of Statistics make that quite clear.
Economic growth slowed to a seasonally adjusted 0.2% in the three months to September, as many suspected it would as the impact of the Federal Government’s stimulus spending from earlier in the year eased.
But there was still enough of the spending in the system to keep the economy in the black for the 3rd quarter in a row.
Without the much-criticised ‘cash splashes’ of last October and then earlier this year, Australia would have had a year of recession, with unemployment above 8%, interest rates down to perhaps 2% and everyone would be facing a very grim Christmas.
Instead we have seen another three months of slow activity, after the solid 0.6% quarter on quarter growth recorded in the June quarter. Interest rates are rising as the economy recovers, unemployment may have peaked at current levels under 6% and growth has been maintained.
It is in fact the weakest for this year, after the surprise 0.4% rise in the March quarter.
That left growth for the year to September at 0.5%, down from the 0.6% in the year to June.
The quarterly figure was half the 0.4% median forecast from the market, which had also forecast annual growth of 0.7%.
The small rise came from a 0.7% increase in household spending and a 6.2% increase in public investment, offset by a 0.9% fall in private investment, and a strong fall in net exports.
The fall in net exports was due to a 2.3% fall in exports and a 5.8% rise in imports and came despite a 1% rise in our terms of trade in the quarter.
The ABS said the industries that provided the main contribution to growth in the September quarter were rental, hiring and real estate services with a 9.9% increase in seasonally adjusted volume terms and construction with a 2.2% increase in seasonally adjusted volume terms.
Non-farm GDP grew 0.3% and Real gross domestic income rose 0.4%.
There’s a strangely out of date feeling with these figures.
"Fiscal fade" was the comment economists used to describe the slowing rate of growth (although the trend rate was a solid 0.5% and perhaps a better indicator of the underlying strength of activity).
Federal Treasury estimated yesterday that the fiscal stimulus added 0.4 of a percentage point to GDP growth in the September quarter, so without it the recession would have continued with growth running at 0.2%, around 2% over the 12 months to September.
The key for the quarter was the 0.7% rise in household consumption spending.
That was supported by the rapidly rising level of consumer confidence, when then fed into improving business confidence and conditions (according to the National Australia Bank surveys).
Investment in dwellings rose for the first time in a year, reflecting the effects of historically low interest rates and support from the first home owners’ breaks.
Private business investment fell in the quarter, but there were substantial differences among the components.
Machinery and equipment investment fell by 2.9%, following the bring-forward of investment in the June quarter from the investment allowance tax breaks.
Non-residential building investment fell a further 6.0% continuing the sharp falls over the past year as developers of home units, townhouses and apartments have found it almost impossible to get bank finance.
The fall would have been larger if not for the growth in school investment associated with the government’s $2.2 billion stimulus assistance to schools which has boosted activity noticeably.
That has been noted by the likes of Boral and Brickworks and both report rising demand for their building products.
Inventories rose in the September quarter as businesses began restocking in anticipation of stronger demand and that also saw imports rise strongly in the quarter.
Public investment increased strongly in the quarter, helping to offset the weakness in private investment
Public investment rose by 6.2%, with most of that increase coming from the stimulus.
Public investment contributed 0.3 percentage points to growth in the quarter.
Export volumes fell 2.3% in the quarter.
That reflected (as previously reported) lower base metal exports, in addition to falls in exports of mineral fuels and gold.
As we saw the terms of trade rose 1% in the quarter to be down 15.9% over the year to September.
Nominal GDP rose by 0.2% in the quarter, after falling in the previous three quarters.
Like the minutes from the Reserve Bank’s December board meetings, these figures (two weeks late because they were being reworked to take account of new bases) are not surprising, and have in fact been overtaken by the strong employment figures for November (and the three months to November); solid retail sales and still growing owner occupied home lending and construction.
The two week delay was worth it. the Australian economy is now 5% bigger at $1.25 trillion, thanks to the new set of national accounts, which include for the first time business research and development investment.
Even though most of the data is for October, the solid rise in car sales for October and November and the solid job growth in both months, are pointing to a much higher rate of activity this quarter.
Annu
