The Australian Bureau of Statistics (ABS) today released the national accounts for the September quarter, which registered a 0.6% increase in real GDP over the quarter and a 2.3% rise over the year. The result disappointed market expectations for 0.7% growth over the quarter and 2.5% growth over the year.
On a per capita basis, however, real GDP increased by only 0.2% and by 0.6% over the year. Further, real national disposable income per capital fell by 1.0% over the quarter and also by 1.0% over the year.
According to the ABS, seasonally adjusted growth for the quarter was driven by:
- a 1.3% contribution from Public gross fixed capital formation;
- a 0.7% contribution from net exports; and
- a 0.4% contribution from Final consumption expenditure; partly offset by
- a -1.4% contribution from Private gross fixed capital formation.
Over the year, Mining (0.8 percentage points), Financial and insurance services (0.4 percentage points), and Health care and social assistance (0.4 percentage points) were the largest industry contributors to growth, whereas Manufacturing, Electricity, gas, water and waste services, and Wholesale trade detracted 0.1 percentage points from growth in trend terms (see next chart).
Results were mixed at the state and territory level, with final demand growing strongly in the Northern Territory (+1.1%), reasonably in NSW (+0.4%), Victoria (+0.5%), Tasmania (+0.5%), and the ACT (+0.6%), weakly in Queensland and Western Australia (0.1% each), and contracting in South Australia (-0.5%) [Note: state final demand is different to GDP]:
The terms-of-trade fell sharply, down by 3.3% over the quarter on lower commodity prices:
And the falling the terms-of-trade lowered income growth, with real per capital national disposable income (NDI) sliding by 1.0% over the quarter and also by 1.0% over the year. Going forward, income growth will continue to be weak as long as the terms-of-trade unwinds from its current very high level (see below charts).
However, despite the fall in the terms-of-trade, the 7% average decline in the Australian dollar (trade weighted index) over the quarter over meant that nominal GDP rose further above real GDP, which is a positive for government finances:
Real GDP per hour worked was flat over the September quarter but was up 1.0% over the year, suggesting improved labour productivity as the structural adjustment under way continues to create greater efficiencies in the weaker sectors:
Finally, the household savings ratio rose over the quarter to 11.1% from 10.2%, and remains well above the levels of the 2000s housing/credit boom, but below the recent peak level of 12.8% reached in June 2009 in the wake of the financial crisis. Households have clearly returned to long-run norms in regards to their savings behaviour (see next chart).
Arguably, this release foreshadows the new normal for the Australian economy. While headline GDP was reasonable, albeit below trend, per capita real GDP growth remains weak – barely outpacing Australia’s growing population. More importantly, per capita national disposable income fell as the terms-of-trade continues its retracement back towards its long-run average.
Looking ahead, headline GDP growth is likely to remain under pressure as mining capex unwinds, whereas income growth will also face stiff headwinds to the extend that commodity prices and the terms-of-trade drift lower, and the population ages.
