Today’s National Accounts show that the Australian economy is growing well despite the biggest fall in our terms of trade in more than fifty years.
At a time when other commodity based economies like Canada and Brazil are in recession, the Australian economy is continuing to grow at a rate that meets and sometimes beats our most recent Budget forecasts.
The diversity and flexibility of the modern Australian economy is continuing to get us through the recent massive falls in commodity prices.
Real economic growth rose by 0.2 per cent in the June quarter, a little below market expectations of 0.4 per cent. This follows a strong March quarter of 0.9 per cent.
This outcome is entirely consistent with what we forecast at the Budget. These National Accounts recorded year average growth at 2½ per cent just as we forecast in the May Budget.
Importantly we have outperformed our Budget forecasts with stronger employment growth and lower unemployment at the end of June.
That strong jobs growth has contributed to the fastest growth in household incomes since December 2013, and has lifted retail sales and household consumption.
These sales are underpinned by investment in housing, which is 7.4 per cent higher over the past year. Furthermore we saw a rise in building approvals yesterday to near record high levels, indicating there is more construction to come in the months ahead.
Beyond housing, we saw the first overall increase in construction in the last 12 months. That is, we are building more factories and offices today, which are offsetting the slowdown in mining construction than we have experienced over the past year.
The transition away from a reliance on mining investment is well underway.
It is most encouraging that today’s numbers again highlight the huge potential of our services sector.
Services are 70 per cent of the economy but only 17 per cent of our exports. Service exports rose a very strong 7.3 per cent over the past year, on the back of the lower exchange rate and increasing demand from Asia.
Facilitating the growth of the services sector by reducing and abolishing taxes as well as cutting red tape is delivering a dividend.
These National Accounts had some one-off factors that impacted on overall growth for the quarter.
Mining exports fell by around 7 per cent over the quarter, with bad weather resulting in major port closures – including operations at the world’s biggest coal port at Newcastle being disrupted for about 10 days in April.
Closures aside, mining exports volumes are up a hefty 30 per cent over the past four years. And as more and more of our LNG and iron ore resource projects hit full production, mining exports will continue to strengthen.
Looking forward, we are already two months into the first quarter of a new financial year, and the Government’s May Budget is already adding momentum to the Australian economy.
Confidence across the economy has picked up since the Budget. Business conditions outside the mining sector have risen to their highest level in almost five years.
We have seen strong rises in new motor vehicles and retail sales as small businesses took advantage of the Government’s $20,000 instant asset write-off to invest in new equipment and goods.
Our economic plan is being implemented and it is working.
For example, employment is growing at its fastest pace in over four years and the number of job ads remains close to its three-year high.
But we cannot be complacent.
In recent weeks we have seen some degree of volatility on global equity markets.
And many commodity based economies have failed to come to terms with the massive declines in their terms of trade. They have failed to diversify their economies.
Canada overnight reported that they have now officially fallen into recession.
New Zealand had a growth rate of 0.1 per cent in the March quarter and is facing significant headwinds.
Other commodity based economies like Brazil are also facing huge challenges.
That’s not to say there are not bright spots.
The United States is coming out of its doldrums and is growing at an annualised rate of 3.7 per cent. As a major driver of global growth and our third largest trade partner, we are relatively well positioned for any unexpected weakness in China.
Later today I will be flying to Turkey to meet with G20 Finance Ministers and Central Bank Governors to discuss global economic events.
I will be reminding colleagues of the historic G20 agreement last year to work together to build an additional two per cent in global growth over the next four years.
All countries must take all possible steps to lift growth and achieve this target, and Australia is playing its role too.
The Abbott Government’s economic plan is seeing Australia through some significant global headwinds.
A key to our plan and our growth target is implementing free trade agreements with Japan, Korea and China. These will create countless new opportunities for Australian businesses which will be able to access the largest new markets in the world.
This will create thousands of new jobs for Australians across the country – from Darwin in the North, to Burnie in Tasmania.
Today’s growth figures are a reminder that if you want faster economic growth, then you won’t get it if you block the China Free Trade deal.
This Government has an economic plan and we continue to press on.
Free trade deals creating thousands of jobs.
$50 billion of new infrastructure being rolled out across the economy.
And lower taxes. Scrapping the Labor carbon tax, the Labor mining tax and the Labor bank deposit tax.
The Abbott Coalition economic plan of lower taxes and more jobs is working, and whilst we have made good progress despite headwinds, there is still much work to be done.