ANALYSIS


AUSTRALIAN ECONOMY GROWS BY 0.3%

Australian gross domestic product (GDP) grew by 0.3% in the March quarter 2017, following a rise of 1.1% in the December quarter. Through the year growth is 1.7%.

EXPORTS OF GOODS AND SERVICES DETRACTS FROM GROWTH

Exports of goods and services fell 1.6% after six consecutive quarters of growth. This result was driven by a decrease in exports of goods (-2.6%), with mineral ores and coal being the main detractors. The contraction was partially offset by a rise in exports of services (2.5%). Exports of goods and services was the largest detractor from GDP growth this quarter, detracting 0.4 percentage points.

DWELLING INVESTMENT FALLS

Dwelling investment fell 4.4% in the March quarter. Through the year dwelling investment has fallen 2.5%. All states except for Victoria showed a fall in dwelling investment during the quarter. Western Australia experienced its sixth consecutive quarterly fall, while the Northern Territory experienced its eighth. Nationally, dwelling investment remains at elevated levels.

COMPENSATION OF EMPLOYEES RISES

Compensation of employees (COE) rose by 1.0% this quarter. This follows a fall of 0.7% in December quarter 2016. Hours worked in all jobs increased 0.3%. The March quarter 2017 Wage Price Index, Australia (cat. no. 6345.0) showed through the year growth of 1.9%, which is consistent with through the year COE growth of 1.5%.

HOUSEHOLD FINAL CONSUMPTION EXPENDITURE INCREASES

Household final consumption expenditure (HFCE) increased 0.5% in the March quarter 2017. The main drivers of HFCE growth were electricity, gas and other fuel (2.9%), operation of vehicles (1.3%) and insurance and other financial services (0.7%). Alcoholic beverages (-1.0%) and clothing and footwear (-0.7%) were the strongest detractors from HFCE growth during the quarter. Through the year, HFCE growth (2.3%) was slightly below its long term average.

HOUSEHOLDS SAVE LESS

The household saving ratio is 4.7 for the March quarter 2017, down from the 5.1 recorded last quarter. This was driven by subdued growth in gross disposable income being offset by the growth in current price household final consumption expenditure of 0.9%. This is the fourth consecutive quarter where the saving ratio has decreased.

CURRENT PRICE GDP GROWS WITH THE TERMS OF TRADE

Current price GDP rose 2.3% following a 3.2% rise in the December quarter 2016. The recent growth in current price GDP is being influenced by the increase in the terms of trade. The terms of trade increased 6.6% in the March quarter 2017, following a rise of 9.6% last quarter. This was driven by a 9.4% increase in the export price index.

INVENTORIES BUILD UP IN MARCH QUARTER

Total inventories increased by $2,069m in the March quarter following a build up of $208m in the December quarter. Inventories in Mining increased by $997m in the March quarter following a large run down the previous quarter. Farm and Wholesale trade inventories have recorded increases in both quarters, this has been driven by the large grain harvest.