ANALYSIS


AUSTRALIAN ECONOMY GREW BY 1.0%

Australia's gross domestic product (GDP) grew by 1.0% in the March quarter 2018, following a 0.5% rise in the December quarter. The Australian economy has grown 3.1% through the year.

EXPORTS CONTRIBUTED TO GROWTH

Exports of goods and services rose 2.4% following a fall of 1.5% in December. Through the year exports of goods and services is up 4.6%. Exports of goods were up 2.9% driven by non-rural exports (3.3%) with mining commodities, Liquified Natural Gas (LNG), Coal, Iron Ore and Non Monetary Gold the main drivers.

GROSS OPERATING SURPLUS (GOS) AND TERMS OF TRADE INCREASE

Private non-financial corporation GOS grew 6.0% this quarter, the strongest growth since December quarter 2016. This was driven by Mining GOS, reflecting both higher production and continued strength in commodity prices. The Terms of trade grew 3.3% for the quarter and has now increased in 6 of the last 8 quarters.

STRENGTH IN PRIVATE BUSINESS NON-MINING INVESTMENT CONTINUES

Private business non-mining investment rose 3.6% this quarter, to be up 14.0% through the year. This growth was driven by machinery and equipment and continues the longer term trend of private business non-mining investment offsetting the decline in private business mining investment. Private business mining investment fell 6.0% this quarter and is down 16.4% through the year.

BROAD-BASED STRENGTH IN COMPENSATION OF EMPLOYEES

COE grew 1.2% with broad strength in both public and private sectors. COE has increased 5.1% through the year, the strongest result since June 2012. Health Care and Social Assistance and Construction industries were the major contributors to this growth. This is consistent with the strong employment growth observed in these two industries. Over the past four quarters average COE has grown by 1.6%.

CONTINUED STRENGTH IN GOVERNMENT EXPENDITURE

Total government final consumption expenditure rose 1.6% this quarter and remains strong through the year. Continued spending on health, aged care and disability services were the main contributors. State and local government expenditure also had strong growth with a rise in employee expenses, particularly in frontline services. This growth is in line with the strong COE growth observed in the public sector.

INVENTORIES

Inventories increased $1,222m for the March Quarter 2018. This contributed 0.2 percentage points to GDP growth. The higher build up in inventories was driven by Wholesale Trade, which increased by $2,038m. This was driven by higher imports of motor vehicles and tobacco products. Mining inventories partially offset this with a reduction of $220m. This draw down was due to strong international demand for coal, LNG and non-monetary gold