Today’s March quarter National Accounts confirm there is strong and broad based momentum in the Australian economy.
Real economic growth rose by 0.9 per cent in the quarter, to be 2.3 per cent higher over the past year. This exceeds market expectations.
This builds on growth of 0.3 per cent in the September quarter and 0.5 per cent in December last year.
This is a good solid result.
It is completely consistent with our measured and appropriate Budget forecasts including our expectation of 2½ per cent GDP growth for this financial year.
It is worth noting that this strong economic growth occurred prior to the 2015 Budget, which will further build on this momentum.
This growth is broad based. Growth in exports, household spending, services and new dwellings confirms that the Government’s economic plan is working.
Indeed, Australia’s 0.9 per cent growth in the March quarter makes us one of the fastest-growing economies in the developed world, and faster than any of the G7 in the quarter.
Exports continue to support our economy, growing by 5 per cent, and this is the strongest quarterly result in fifteen years.
In part, they highlight the dividends Australia is reaping from the mining investment boom. More and more resource projects are hitting full production, resulting in record-breaking mining exports.
But, there is a more important story in these figures.
On numerous occasions I have highlighted the huge potential of our services sector, which represents 70 per cent of our economy but just 17 per cent of our exports.
Significantly, services exports are up 8 per cent over the past year, in line with rising demand from Asia. This is the fastest growth since 2007.
There is growth in areas such as tourism, education and professional services, which are set to become increasingly important drivers of growth in the future, and will be supported by our free trade agreements with China, Japan and Korea.
Once again I say our economic plan is working.
The transition in our economy is being managed well.
Consumer spending is continuing to strengthen, rising by another 0.5 per cent in the quarter. Higher household spending is being supported by low interest rates and rising household wealth.
The biggest post-Budget bounce in consumer sentiment since 2007 suggests the outlook for household spending remains bright.
While business investment fell 3.5 per cent in the quarter, this was largely driven by the expected decline in mining investment.
That said, we are seeing encouraging new investment in housing supply nationally, with housing investment rising by a strong 4.7 per cent in the quarter and 9.2 per cent over the past 12 months.
There is clear evidence of a construction response to elevated house prices. This additional supply is expected to continue, with a large pipeline of housing approvals and record low interest rates.
The transition in our economy is still in progress.
As expected, the terms of trade declined by a further 2.9 per cent in the March quarter, the fifth fall in a row and one of the biggest consecutive falls in history.
Labour productivity was also flat in the quarter, reflecting stronger employment outcomes.
That said, improving productivity and creating jobs remains central to our economic plan and our Budget strategy. Almost a quarter of a million jobs have been created since this Government came to office.
Today’s national accounts show the deep resilience of the Australian economy.
A rebalancing of growth is taking place with road blocks being removed.
New markets are being opened and our economic plan is working.
These numbers confirm that Australia is rising to the challenge.