The Australian Bureau of Statistics today (4 September 2019) released the June quarter 2019 results for the Australian National Accounts.

The results showed that the Australian economy grew 0.5 per cent (seasonally adjusted) in the June quarter 2019 and grew 1.4 per cent annually. This result is down 0.4 per cent from the previous annual period that showed GDP growth of 1.8 per cent. Overall, the June quarter 2019 result showed the slowest annual GDP growth rate since 2009.

What are the changes to the components of GDP?

Household final consumption rose 0.4 per cent (seasonally adjusted) in the June quarter 2019, while government final consumption expenditure in the June quarter 2019 rose 2.7 per cent (seasonally adjusted).

Total gross fixed capital formation (or investment expenditure) fell 1.7 per cent (seasonally adjusted) in the June quarter 2019. Private investment declined 1.6 per cent, driven by falls in non-dwelling construction (-5.9 per cent) and dwellings (-4.4 per cent). This movement was partly offset by a rise in machinery and equipment investment (3.4 per cent). Public investment decreased 2.3 per cent, driven by state and local general government (-4.1 per cent). This decrease was partly offset by strength in expenditure on defence (7.1 per cent).

Total inventories decreased in seasonally adjusted terms in the June quarter 2019, following an increase in the last quarter. Consequently, inventories contribution to GDP growth was -0.5 percentage points.

Terms of trade rose at 1.4 per cent (seasonally adjusted) in the June quarter 2019 and grew 8.9 per cent annually.

What caused this result?

The result from the Australian National Accounts for the June quarter is clear. The domestic economy was weak, while external sector drove growth for the quarter.

  • Net exports contributed 0.6 percentage points to GDP growth. This was attributed to the strength in mining sector, with strong export volumes driven by mining commodities (particularly coal and liquefied natural gas) more than offsetting weak volumes of rural commodities. Another factor was the fall import volumes (particularly imports of consumption goods).
  • In contrast, final domestic demand was weak, with Gross National Expenditure contributing -0.2 percentage points to growth in the June quarter 2019. Modest growth in consumption expenditure was partly offset by weak investment expenditure (particularly dwelling investment fell 4.4 per cent and non-dwelling construction fell 5.9 per cent).

Western Australia saw the largest rise in state demand with growth of 0.8 per cent, followed by Victoria with 0.5 per cent growth. In contrast, growth in NSW was 0 per cent, Queensland with 0 per cent, South Australia with a fall of 0.2 per cent.

What is the market reaction?

The Australian share market is down 0.6 per cent today due to weakness in offshore markets. Today’s result from the Australian National Accounts is broadly in line with market expectations. Further, today’s result does not change the market’s view of expectations of a further easing in monetary policy in coming months.

 

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September 4, 2019