GDP rebounds

See the latest Australian dollar analysis here:

Macro Morning

The ABS released their National Accounts aggregates today, with a broad surge in GDP growth since the dismal natural disaster-affected first quarter.  The key figures are below.

Also important is the revision to the March quarter – up from -1.1% to -0.9%, leaving GDP up 1.38% over the year to June, and per capita GDP flat over the year (up 0.08).

GDP per capita has now recovered to a point first reached in March 2008.

The other interesting notes from the release were the positive contributions of inventories (adding 0.8 percentage points) and consumption expenditure (0.7 percentage points) to GDP growth.  While net exports contributed -0.5 percentage points, which is quite a change from the previous quarter.

The household saving ratio declined a little from 11.7% to 10.5%:

Household income was up 2.9% in the quarter and 7.6% over the year. So, roughly 4% in real terms. It’s difficult to know how much of this result is arising from expanding households but stalled GDP per capita suggests we are not shifting to the good times as fast as this figure suggests.

Of course, the question on everyone’s lips is where to from here? Will we, as many suggest, improve on this quarter going into the second half of 2011, or will we continue the relatively flat trend seen over the three years?


  1. So, what surprised the forecasters on the upside was the positive contribution from final consumption expenditure, which is related to the decline in the household saving ratio – right?

  2. I was quite surprised by this result to be honest. Of course, this is all in the past, before the debt-ceiling, US downgrade and further Euro-Zone crises.

    Good result but tomorrow’s Employment release will be more important. And let’s not forget what might come out of Europe this afternoon regarding the bailout ruling.

    Am I correct in understanding that individual stats like household income are not reported per capita?

  3. Strange. Who hasn’t been caught by surprise on this one? The Bullhawks will love this. The unemployment figures will be very interesting.

  4. Adam Carr is getting very excited

    You can see why I have been so contemptuous of the economic debate in Australia. For months now we’ve been told about how bad things are domestically – the non-mining recession etc and the fact that consumers have put their wallets away. Well the non-mining economy actually rose by 1.3 per cent in the quarter, while mining was flat. Manufacturing output rebounded, rising by 2.8 per cent in the quarter, and a whole bunch of other non-mining related industries recorded strong growth (including transport, wholesale, construction, information and media, and professional services). The Australian economy consists of more than just BlueScope Steel and a handful of whinging retailers it seems.

    Today’s numbers show just how baseless these arguments always were and reveal the unfounded hysteria underpinning them. The worst bit is they were based on nothing and yet they became and continue to be the consensus.

    The 1 per cent bounce in consumer spending is particularly positive as it was broad based across most components and includes a large 5.5 per cent slump in car sales which, of course, we know was due to supply chain disruptions. In particular, retail spending volumes were strong (and values for that matter), rising by 0.9 per cent for the quarter, following a 0.6 per cent rise in the first quarter. Clothing sales surged 2.3 per cent, furnishing were up 1.9 per cent after a 1.4 per cent gain and spending on recreation was very strong. Overall, discretionary spending is very strong and we know that spending on services has been robust. No sign that consumers are terrified of spending any money – and it’s much more than just on food and other essentials to those alarmists out there.

    So there MB “alarmists”! The non-mining economy is going gangbusters, as is manufacturing, and consumers are splurging like crazy. Not surprising when household income is exploding by 7.6% YoY.

    • Because the MSM are on whatever bandwagon appears on the ascendency – and that at present is the doom and gloom bandwagon. A couple of months ago they could only see good, now they can only see bad. Pack mentality.

    • From DE’s link and NineMSN:

      The standout feature was a big positive contribution from the run-up in business inventories over both the quarter and the year.

      If not for faster growth in inventories, the quarterly rise in GDP would have been only 0.4 per cent and annual GDP growth would have been 0.1 per cent.

      Didn’t you get the memo: the inventory build is gearing up for the anticipated surge in demand in the second half!

        • Well even that genius Pascoe admitted today…

          Even a key factor in the June quarter GDP rebound – inventory growth – can be a double-edged sword depending on your view of what has been happening since June 30, either wholesalers rebuilding stock levels with confidence about demand or wholesalers setting themselves up for trouble by being over-optimistic about demand.

          But it goes on the plus side regardless.

          Now, thinking about the newsflow since June 30, do you think wholesales are gearing up for a big surge in demand, or did they order too much stock for what will be a very disappointing second half for retail.

          I know where my money is.

  5. Some of the MSM analysis seems to be that the retail sales surveys have been “woefully underestimating the strength of the consumer”.

    Lets say this is the case, and the consumer is avoiding the malls and spending up big online with overseas retailers. I’m wondering how this adds to our GDP?

  6. CJ is having a fit of glee on his blog, calling people fools or liars and quoting a pompous Adam Carr.

    He seems to think the economy is flying. Return of the Bullhawks!

    • >CJ is having a fit of glee on his blog, calling people fools or liars and quoting a pompous Adam Carr.

      I wonder what the other two readers make of it 🙂

      As far as I can tell from his pageviews he gets about 200 reads a day. I would expect at least 100 times that from a Svengali.

    • not sure how a run up in inventories indicates a flying economy. But anyway…

      This is one of those numbers where the underlying structure matters more than the aggregate print IMO

    • I don’t often go there but you piqued my interest. Actually thought Bloxham’s piece not that unreasonable.

    • CJ is having a fit of glee on his blog, calling people fools or liars
      I think he is referring to Gotti and Mark Bouris – his fellow BS commentators. I wonder how they will react to the name calling! :p

  7. I like reading Macro Business but I think Houses and Holes’ calls have been poor based on this GDP data. It seems that this blog, which I use to get a different point of view, is overcome come by negative group-think and does not have a very good understanding of the Australian economy. Houses and Holes should admit his mistakes.

    • You’re always free to read and make up your own mind, right? Hardly just this blog which has been negative on the Aussie economy.

    • !

      I’m happy to admit my mistakes. And indeed have done so when I’ve made them. Perhaps you could list the ones you refer to?

      I didn’t call for a weak GDP result. In fact, I said in comments earlier this week that I expected a decent result.

      I’m probably the least bearish on housing as well.

      I successfully predicted the current global slowdown some months ago.

      I’ve tracked the local data and have run rings around the bullhawks on interest rates,

      I’m happy to take on your criticism but you’ve simply said I suck. Perhaps for being born?

      • MB must be making it’s mark on the MSM. I’ve never seen so many dissenters sprouting rhetoric in one day before (Mr Wilkie, GB). It’s a credit to the bloggers and the informed debate that occurs every day on the site.

        I also question whether Mr Wilkie truly understands Group Think. Usually it comes from a strong leader and weak followers who are influenced by said strong leader (i.e. Enron). Given that the bloggers consistently question each other and amend arguments and the the more regular users commonly agree to disagree; how can Group Think be formed?

        Keep it up MB!

    • Would you like to go back to DE’s last two posts on the Aus economy and then come back and tell us where he is wrong?

    • Upside down letters and Reversed words..
      Can leave someones name…sore and sounding like a person disease…

      Always pays to cross-check we do at MB..Hey H&H
      Cheers JR

  8. Everywhere in the world is tightening their belt, whether it is the silly austerity in the UK/EU or the inflation fighting in Chindia. That typically means less demand for anything in a global economy because no one has any money, so I don’t see how anyone can be anything but bearish.

    On the Household Savings Ratio fall, you have to wonder whether the domestic economy is beginning to grow or whether it is the start of another debt/credit supported bubble/binge.

    The unemployment figures might tell us, they’re out tomorrow and a fall below 5% would be heaven sent (4.9 doesn’t count) in my view and suggest domestic growth.

    • Why is the UK a ‘silly’ austerity programne but, at the same time, you seem worried that ‘it is the start of another debt/credit supported bubble/binge’ here.

      The UK is mired in debt running a large Current Account deficit but you seem to be suggesting they should continue to grow that debt perhaps at an increasing rate?

  9. What is the outlook for interest rates based on these GDP figures? Looks to me as though they will steady for now.

    • That I guess is a problem. While the GDP beat forecasts, they were quite low. We can’t grow out of a global recession at this rate, which is what has been panicking markets recently. Sure the world economy has been growing but at very poor rate, and recently it has been slowing with key Euro-zone countries GDP and and US employment flat.

      Still I do think we are somehow being too bearish in the short-term. Sure if things were left alone they would go sour but we forget that politicians are always willing to run our future into the ground in order to squeeze as much juice out of the economy while they are in office. There is no limit to the ideas they can come up with to keep things going. Do people really think that Europe or the US will not just print money in order to ease their debt when crunch time comes? I wouldn’t be surprised to see such policies.

    • Yes, exactly. Overall, things aren’t quite as bad as some of the bears feared — nor are they as good as the bulls had hoped.

      • If the economy keeps up it’s sluggish performance and inflation neither abates or threatens to accelerate that 4.75% cash rate could well look like a piece of the furniture. As it is the cash rate has been stuck there for what, 10 months now?

  10. Houses and Holes, I beg to differ.

    You have consistently claimed the non-mining economy is weak. Every day you talk about this. The GDP data in the first half of 2011 shows this to be totally incorrect.

    Secondly, you attack these “hawk/bulls” as if you are obsessed with them. My reading shows me we have had high underlying inflation in Australia for the last six months and we have had very strong domestic demand.

    Surely you accept that your complaints against the hawk/bulls look a silly when judged against the underlying inflation and growth results in 2011?

    It is like you are living in England! I would ask, have you ever studied any economics subjects at university?

    With respect.

    • ..and we also had unemployment going up and house prices trending down and many retailers going into receivership. Did you convenientally skip those .. Mr Wilkie. Why jump up and down for a small uptick? and whats this go to do with studying economics, especially when you ask 10 economists on individual forecasts they give you 10 different answers.

    • I’m not going to talk for H&H, but the general feeling I have been getting from the articles here is that the trend in important – so a one quarter surge is just that. Particularly after a -0.9% print in the previous quarter, and particularly in light of the longer trends in per capita figures.

      As you can see from the chart, the economy has only grown in proportion to the population for three years. Given the pre-2008 per capita trend I wouldn’t be talking the economy up like there has not been any significant change since the GFC.

      The other thing I will note is that if natural disasters were to blame for much of the low first qtr print, the rebuilding is probably also a little to blame for the high q2 print. My expectation is that this figure will be revised down slightly and next quarter’s number will be more subdued.

    • I agree with your comments Richard…I notice that my previous post got removed, in support of your previosu comment. Its run like a dictatorship here it seems!

      If this doesn’t get removed I may add a few points to this:

      – It isn’t just HnH that is claiming the non-mining economy is weak. The general tone of the whole blog is very negative.
      – Attacking C.Joye/A.Carr has been a favourite pasttime of virtually everyone that posts comments here. The funny thing is their analysis has been more prescient than anybody else’s. They actually understand economics.
      – That is an excellent question. They claim the MSM is biased but the bias here is in my opinion worse than that of the MSM. Being constantly negative is fine, but there is an economic cycle. You can’t say you were proven correct 3 years after you’ve been banging on about economic collapse
      – At present we are taking advantage of soaring commodity prices, but we are much more than that. We were a viable economy long before soaring commodity prices came along. People forget this fact, including those on this blog.

      • “The funny thing is their analysis has been more prescient than anybody else’s. They actually understand economics.”

        That is the most absurd comment I have read.Well BK that just shows what you want to believe,if you dont get it here , maybe you can find it somewhere else.

      • No BK is correct.

        Economics in the mainstream is neoclassical theory. That is the paradigm through which Carr/Joye and mainstream economists see the world.

        The fact that it has been thoroughly disproven as a theory is also correct.

      • At present we are taking advantage of soaring commodity prices, but we are much more than that. We were a viable economy long before soaring commodity prices came along.
        It seems you have been reading this blog in some parallel universe then.
        Literally all of HnH’s blog posts are about saving the “viable economy” from being hollowed out by a transitory commodity + house price bubble.
        You said “we are much more than that”. Can you elaborate? Tourism? Education? Agriculture?

      • Interesting that one quarter of strong GDP growth has brought out some bulls decrying the supposed “doom and gloom”.

        Actually, the “doom and gloom” catch cry is quite bemusing, because I am sure that most of us see it as “realism”. Like many bears now, I was a bull during the mid-naughties as those double digit growth years racheted up.

        It’s almost as if they say you’re a pathetic person for not thinking that we have too much debt and the debt binge can’t continue ad nauseum, or that house prices will go up forever, doubling every 7 – 10 years, or that there are severe imbalances in our economy with productivity struggling for over a decade and key sectors being squeezed out by mining. I’m a bit bemused by it all, as if the belief of thinking positively will protect us from our economic follies.

        By all means, if coming on a blog and attacking those who don’t see the world as a big shiny rainbow full of IPs growing over wages and inflation forever for all makes you feel good, then I guess you can feel good for a day.

        But heaven forbid this quarter’s GDP is show to be a blip and the US and Europe head back into recession. Will you be back on the blog commenting then, perchance?

      • “You can’t say you were proven correct 3 years after you’ve been banging on about economic collapse”.

        So we’ve been banging on about economic collapse for 3 years hey BK? That’s funny, the last time I checked, Macrobusiness started in January 2011.

    • Surely you accept that your complaints against the hawk/bulls look a silly when judged against the underlying inflation and growth results in 2011?
      Sure, now why didn’t RBA board hike interest rates during that period?

    • Mate, I’m here to help predict what the RBA is going to do. I got it right.

      The bullhawks got it wrong all year. And yes, it’s a lot of fun jousting with them daily. I suspect they enjoy it as well.

      As for a weak services economy, I just track the data. It’s been consistently and thoroughly weak. On GDP, as Rumple says, in per capita terms it’s gone nowhere in three and a half years.

      If you’re going to criticise me, please do it in detail, with reference to actual mistakes. Don’t just say you agree with some dude that disagrees with me.

    • “Have you ever studied any economics”?

      Why? Is an appeal to the authority of formal qualifications in a pseudo-science required for rational, evidence-based debate?

    • I just watched Bill Evans confirm a lot of what we saw today, and he said partly due to inventory buildup.

      As for the criticism Richard I never saw MSM predict the GFC, and now with a possible “Great Contraction” it’s being discussed here on the publically available stats.

      People here don’t set out to talk down the Australian economy as that is dumb, but I think everyone on this site wants better governance for now and the future. It’s not negativity, and if you want some real negative stuff look at some of the other blogs in Australia.

      Also to consider Australia as some isolated entity that will be unaffected by a global credit issues is not realistic. No one wants bad news, but look to those who spun this Ponzi system to us before attacking a analytical view and options to make things better for the future; we won’t get that by staying silent. Nothing is perfect however, so join in with your counter arguments and provide real statistical ABS evidence etc.

    • But it has worked well for a period not far short of two decades now, with no obviously superior framework on offer.

      This is surely a fact. But is it driven by demand or mainly Government and semi government enterprises increasing prices to service debts etc?

      In any case domestic inflation has been offset by lower import prices.
      Hehe! Get ready for the reversal of that particular offset!!!

    • In my view university education of economy has become irrelevant when only around 20 economists predicted the GFC in 2008. This is the most obvious evidence of a huge gap between economic academia and the real world.

      • +1

        The ones that did predict it were ridiculed as well.

        Bottom line…those in the business of making money are NOT going to tell the truth until it’s too late. Or take the JPM/GS’s of this world who sell you a product talk it up and then short it knowing it’s a “sh..y deal”.

        The CB governors have to spin the positive so don’t expect them to see a looming disaster either.

        That’s why if you take the good from a site like MB you’re more aware.


  11. Please don’t forget that the GDP number is for the second quarter. Ancient history, rear view mirror data.

    Much of the more timely data in recent months has been pointing to weakness, and the ongoing share market down trend is pointing to further weakness in coming months.

    • so are you saying GDP data should never be looked at? It is always ‘ancient’ every single time it is released

      • no, if the GDP figure had been very bad it would have confirmed that H&H and the doom sayers were right. But it didn’t so its “ancient history”.

        You do really need to tone down the gloom. We had a blog the other day entitled something like “the Australian economy is fundamentally broken”. It clearly isn’t.

    • A lot has changed in the world since the June quarter ended.

      I doubt if the RBA will place any weight on growth figures from 3-6 months ago when they next meet to consider interest rates.

  12. It is not trolling…I’m trying to have a reasonable debate with you. However if you’re not in the negative majority on this blog then you get shot down. How about instead having a proper debate about the points raised.

    My view is things are going OK (not spectactular), and if you’re overly negative, you’re going to be very wrong. In fact you’re going to be wrong if you hold views on either end of the spectrum…muddle-through, weak but still positive growth is my view.

    Thats my view…free world.

    • Please again list where my views are extreme:

      – mildly bearish on housing in nominal terms, more so in real terms – correct
      – bearish on Australian services economy to the extent that the RBA should not raise rates all year – correct
      – began forecasting a Western recession three months or so ago – so far correct

    • I’d be interested to find out the data you are viewing that shows that things are going well. I think we’d all like to hope that you are right but it doesn’t seem to be that way.

  13. quick 2 cents:

    I’d side with those that point out that while the result was not as bad as expected it is nothing to be cheerful about.

    Also remember that we have both sides of politics banging on about getting the budget back into surplus. As government spending is wound back over the coming 18-24 months (assuming that this occurs) it seems to me like we don’t exactly have a private sector (ex mining) going gangbusters to take up the slack.

    • “…we don’t exactly have a private sector (ex mining) going gangbusters…”

      Swan did try to avoid that point I thought – ie when asked about significance of mining contribution skirted around that and pointed to strength ‘in manufacturing and across the board’.

  14. Well I for one am happy about these GDP numbers seeing that I’m about to lose my permanent IT job.

    So judging by these fabulous GDP numbers, I should be able to find another secure IT job pretty easilly right?


  15. My view of the Australian economy right now:
    • As a whole we are ok as long as things truck on as they have been in our main export partners.
    • Retail is weak but it’s more the smaller and indebted businesses suffering and certainly not as bad as Gerry Harvey would have us believe.
    • I feel we have a potential problem with inflation and it would take a GFC style meltdown for the RBA to cut and that barring a high CPI rates will be stable for the foreseeable future.
    • Households are holding too much debt but on the whole will muddle through as they have been, except if the RBA senses inflation.
    • The decline in manufacturing is structural and part of globalization, speed up by the strong AUD
    • Strong AUD is structural and business needs to deal with it. Be that as it may the AUD is also no safe haven and will be sold down if we see a 2008 situation again.
    • Houses (in general) are overvalued and will continue to slip with rates at current levels unless stimulus is added. I expect further drops in the region of 5-7% which is entirely healthy. If rates where raised falls could double, if they were cut I expect flat to 5% up in 2012.
    My thoughts above are liable to change at the drop of a hat given we are floating in a global sea and are ransom to its tides.

  16. I’m going to declare this an official I-told-you-so day for the bullhawks. Knock yourself out guys. Enjoy your moment in the sun.

    • They’ll need a time machine. GDP numbers and any cause for celebration apply through to the period up to end of June. The sun set in July when the share markets began accelerating lower.

      • In my view, all this is going to achieve is a whole lot more “Rates set to rise” headlines which will knock the stuffing out of the non-mining economy.

        I think we can safely write-off this spring’s selling season in the property market.

      • The data in the U.S. for August so far has proven better than the bears have expected.

        Sharemarket falls do not mean recession and gains likewise do not indicate anything robust. You are confusing economic data with sharemarket performance.

        The data for August out of the U.S. has been OK – jobless claims are steady around 400k. ISM Manufacturing and non-manufacturing both still above 50.

        So where is the evidence of a Western recession? Its the same ole’ typical weak growth story in my view….i remember houses and holes suggested that recession was imminent due to a regional manufacturing survey in the U.S. which is already ‘ancient’. You’re going to have to provide more than saying ‘the sun set in July’

        • The Philly Fed “regional ancient” number which you refer to has correctly predicted a US recession something like the last 7 times. Various commentators have said that there is less than 10% chance it is wrong this time.

          There are a lot of other negative indicators, and the few positive ones are only marginally positive.

          So I don’t think its very controversial anymore to predict a US recession. HnH has provided his independent take, and is with the majority at this time.

          Oh, and seeing as you said “Western” – a recession in the Eurozone, or at least most developed economies, is surely highly likely now. The question is more whether it will be an outright catastrophe.

        • US PCE came in the highest for about 2 years or so as well (can’t remember the exact number now but posted here at the time). Agree weak growth but no recession imminent. The ECRI boss is one of the better prognosticators on this. They were well ahead of the pack forecasting a global turndown and maintain a “no recession” forecast.

          One wonders how much all the debt ceiling hysteria/gloom might have influenced surveys carried at around that time. The next couple of months will be interesting to get a read on that.

          • Yes the ECRI WLI is falling but the thing about the ECRI is that they understand their own data better than the punditry. It was a much lower value in 2010 when there were punditry calls that the low value was signalling a recession but they rejected those calls/claims just as they are rejecting them again now.

        • Jeez, mate the ISM has fallen within a whisker of 50, its already in recession Europe. Growth is CLEARLY slower than three months ago. I’ve already said that August data was better than I expected but to assert that its just the same old slow growth is factually wrong.

          Anyway, that’s enough of you today. I’m outta here.

    • ‘Enjoy your moment in the sun.’ My advice exactly. We agree. That is all you can do with these figures, they are better than expected. Some see less promising trends. This may or may not be the case next quarter.

      • Mining PR Bot:

        I was referring to the bullhawks crowing “I told you so”.

        The inventory build was responsible for 0.8% of the 1.2%. Consumption added another 0.7%, but its apparent that most of that leaked to imports (see below)

        I have no explanation for household incomes up 2.9% in the quarter and 7.6% over the year, although I will say it contradicts other data.

        The standout feature was a big positive contribution from the run-up in business inventories over both the quarter and the year.

        If not for faster growth in inventories, the quarterly rise in GDP would have been only 0.4 per cent and annual GDP growth would have been 0.1 per cent.

        Domestic final demand – the total of all consumption and investment spending in Australia – rose by 0.7 per cent in the quarter and 3.4 per cent through the year.

        But, illustrating the leakage of this spending to foreign suppliers of goods and services, growth in imports was 4.3 per cent in the quarter and 10.5 per cent though the year.

        Import volume is currently running at about one quarter of final demand.

        That means the volume of imports in the March quarter was equal to one-and-a-half times the rise in domestic demand, while the annual rise in imports accounted for about three quarters of the increase in demand.

  17. Certainly, the result appears to fly in the face of everything I have been seeing. Either much of what I’ve been reading here at macrobusiness is 180 degrees wrong or………the June quarter figures are not all they seem.

      • From Bill:

        The irony is that the external sector continues to drag the growth rate down despite our so-called “once-in-a-hundred-years” mining boom.

        … in other words:

        “What Sovereign Wealth?”

      • Cheers Senexx.

        That off-the-cuff comment was not meant to be disparging to Macrobusiness, I was just still so surprised by the result.

        I don’t agree with absolutely everything that H&H, Leith, DE, Prince and the others say but I respect their knowledge and understanding and I consider Macrobusiness to be one of the best sources of information on matters economic that a layperson can read.

  18. You will learn more and get better information about economics here than at even the best Australian universities. I sit in my masters lectures reading MB as it is of much greater value.