ANALYSIS


AUSTRALIAN ECONOMY GROWS BY 0.6%

Australian gross domestic product (GDP) grew by 0.6% in the September quarter 2017, following a 0.9% rise in the June quarter. The economy grew 2.8% through the year.

COMPENSATION OF EMPLOYEES GROWS STRONGLY

Compensation of employees (COE) grew 1.2% in the September quarter 2017, contributing 0.6 percentage points to GDP growth. COE grew in all states and territories, in both the private and public sector. Growth in Construction, Professional, Scientific and Technical Services and the Finance and Insurance Services industries drove the increase. Through the year, COE has increased 3.0% and is consistent with growth in both hours worked and the wage price index.

HOUSEHOLD SAVING RATIO

The household saving ratio is 3.2% in the September quarter 2017, up from 3.0% in the June quarter 2017. Gross household disposable income grew 0.5% during the quarter, outstripping the 0.2% growth in current price household final consumption expenditure (HFCE). This is the first time the household saving ratio has increased since June quarter 2016.

Quarterly growth in current price HFCE is the lowest since March quarter 2005. Falls were seen in furnishings and household equipment (-1.4%), food (-1.0%), hotels cafes and restaurants (-1.0%), communication (-1.0%), clothing and footwear (-0.9%), health (-0.9%) and purchase of vehicles (-0.9%). Current price HFCE is up 3.4% through the year, with consumption of electricity, gas and other fuels up 11.5% and cigarettes and tobacco up 11.1%.

ENGINEERING CONSTRUCTION INVESTMENT ON THE RISE

New engineering construction grew 6.3% in the September quarter 2017, contributing 0.2 percentage points to GDP. Despite falling 49.6% since its peak in December 2012, new engineering construction has increased in three of the past four quarters and has grown 12.7% through the year.

STATE AND LOCAL GOVERNMENT INVESTMENT EXHIBITS STRENGTH THROUGH THE YEAR

Through the year, state and local general government investment grew 16.6%. New South Wales and Victoria were the main contributors to growth through the year, on the back of continuing public infrastructure projects. State and local investment declined 15.4% in the September quarter 2017 following the acquisition of the Royal Adelaide Hospital in June quarter 2017.

PRICE PRESSURES REMAIN WEAK IN SEPTEMBER QUARTER

The terms of trade had a small fall of 0.4% in the September quarter 2017 following a decline of 6.0% in the June quarter. The fall this quarter was driven by a 3.0% decrease in the export price index, reflecting lower prices received for coal, metal ore and gas, which was partially offset by a 1.6% fall in the prices paid for imports. The domestic final demand implicit price deflator was flat, the weakest reading of domestic price pressures since March quarter 2016.