Australian economy grows 0.4 per cent in June Quarter

Australian gross domestic product (GDP) rose 0.4 per cent (seasonally adjusted, chain volume measure) in the June quarter 2023 and by 3.4 per cent over the 2022-23 financial year, according to figures released by the Australian Bureau of Statistics (ABS) today. GDP per capita fell 0.3 per cent.

Katherine Keenan, ABS head of national accounts, said: “This was the seventh straight rise in quarterly GDP, and annual growth remained above trend, reflecting the absence of significant COVID-19 disruptions, such as lock downs, in 2022-23."

“Capital investment and exports of services were the main drivers of GDP growth this quarter.”

Total gross fixed capital formation rose by 2.4 per cent. Both public and private investment rose.

“The growth in public capital was driven by health and transport infrastructure investment. National defence investment also contributed to growth, rising by 16.2 per cent.”

“The increase in private capital was driven by a 4.3 per cent rise in new machinery and equipment, led by continued investment in light and heavy vehicles and other transport equipment. Ownership transfer costs also grew, rising 3.9 per cent following six consecutive quarterly falls,” Ms Keenan said.

Services exports rose 12.1 per cent, driven by travel services (+18.5 per cent) as the number of international students and tourists to Australia continued to recover from the COVID-19 pandemic. This was the biggest driver of overall export growth (+4.3 per cent).

Imports of services rose 4.7 per cent after a rise of 4.6 per cent in the March quarter. Travel services (+11.2 per cent) was the main driver as the number of Australians travelling overseas rose.

Net trade in goods contributed 0.5 percentage points to GDP and was closely linked to the decline in change in inventories, which fell by $3.4bn, detracting 1.1 percentage points from GDP growth. Global supply-chain constraints continued to ease over the quarter as domestic inventory behaviour normalised.

The rise in goods exports (+2.5 per cent) was driven by mining commodities, facilitated by a $1.1bn rundown in mining inventories. Improved weather and reduced bottlenecks allowed higher shipments from ports, despite lower underlying mining production (-1.3 per cent).

Goods imports fell 0.2 per cent despite strength in domestic demand for machinery and equipment and motor vehicles. This led to a drawdown of retail and wholesale inventories of $2.4bn over the quarter.

Household spending remained subdued, rising 0.1 per cent and contributing 0.1 percentage points to GDP growth.

“Spending on essential goods and services were the main contributors to the rise in household spending, while many discretionary categories detracted. The exception was spending on vehicles which rose 5.8 per cent as supply bottlenecks eased during the quarter,” Ms Keenan said.

The household saving to income ratio fell for the seventh consecutive quarter to 3.2 per cent, its lowest level since June quarter 2008.

“The fall in the household saving ratio was driven by higher interest payable on dwellings, income tax payable and increased spending by households due to the rising cost of living pressures," Ms Keenan said.

Total income received by households rose 1.8 per cent, driven by interest received and compensation of employees.

Nominal GDP fell by 1.2 per cent in the June quarter but grew by 9.7 per cent over the 2022-23 financial year.

The GDP implicit price deflator fell 1.5 per cent in the June quarter. This was driven by a fall in the terms of trade (-7.9 per cent), as export prices fell (-8.2 per cent) more than import prices (-0.3 per cent).

The decline in export prices was driven by energy related commodities, as coal and other mineral fuels prices both fell. This was the largest quarterly fall in export prices since June quarter 2009. The fall in import prices was led by oil-based products.

The large decline in commodity prices caused mining profits to fall 11.2 per cent. This drove an overall fall in gross operating surplus of 4.5 per cent.

Domestic price growth remained steady at 1.2 per cent, driven by rises in household rents and food as well as capital goods, which rose due to the depreciation of the Australian dollar.