Economic activity up 0.2 per cent in March Quarter

Australian gross domestic product (GDP) rose 0.2 per cent (seasonally adjusted, chain volume measure) in the March quarter 2023 and by 2.3 per cent compared to March quarter 2022, according to figures released by the Australian Bureau of Statistics (ABS) today.

Katherine Keenan, ABS head of National Accounts, said “This is the sixth straight rise in quarterly GDP but the slowest growth since the COVID-19 Delta lockdowns in September quarter 2021."

“Private and public gross fixed capital formation were the main drivers of GDP growth this quarter,” Ms Keenan said.

Nominal GDP grew by 2.1 per cent in the March quarter, and 9.2 per cent through the year.

The GDP implicit price deflator rose 1.9 per cent in the March quarter and 6.8 per cent compared to March 2022. This was driven by a rise in the terms of trade (+2.8 per cent), with a stronger fall in import prices (-4.0 per cent) than export prices (-1.4 per cent).

The fall in import prices was driven by the global fall in oil prices and the appreciation of the Australian dollar. This was the largest quarterly fall in import prices since December 2010. The fall in export prices was led by rural and mining commodities.

As goods inflation moderated, domestic price growth slowed to 1.1 per cent following a 1.4 per cent rise in the December quarter 2022.

Private gross fixed capital formation rose 1.4 per cent, after a 0.9 per cent fall in the December quarter.

Machinery and equipment rose 6.0 per cent, led by continued investment in light and heavy vehicles, agricultural equipment and automation. Non-dwelling construction rose 2.4 per cent, driven by higher investment in renewables and electricity infrastructure. These were partly offset by falls in ownership transfer costs (-5.0 per cent), new and used dwellings (-1.3 per cent) and alterations and additions (-0.9 per cent). Rising interest rates, falling property prices and material and labour constraints all contributed to the dwelling related falls this quarter.

Public gross fixed capital formation rose 3.0 per cent, following a 1.2 per cent fall in the December quarter.

“This increase in public capital was driven by both a 3.9 per cent rise in state and local general government expenditure and a 4.1 per cent rise in investment by state and local public non-financial corporations in transport infrastructure and health,” Ms Keenan said.

Household spending rose 0.2 per cent, contributing 0.1 percentage points to GDP.

“Spending on essential goods and services were the main contributors to the rise in household spending, while discretionary categories such as furnishing and household equipment, purchase of vehicles and other goods and services all detracted from growth," Ms Keenan said.

Compensation of employees increased 2.4 per cent, following a 2.0 per cent rise in the December quarter.

The continued strength was underpinned by the tight labour market as the unemployment rate remained at historical lows and job vacancies were elevated. Increased employment, hours worked, pay rises and bonuses in the public sector also contributed to this rise.

The household saving to income ratio fell to 3.7 per cent, its lowest level since June quarter 2008.

“The household saving ratio fell to its lowest level in nearly 15 years,” Ms Keenan said.

“This was driven by higher income tax payable and interest payable on dwellings, and increased spending due to the rising cost of living pressures".

Total income received by households rose 1.7 per cent, driven by compensation of employees, while total income payable rose 4.4 per cent. Household consumption grew faster this quarter than the rise in gross disposable income.

Net trade detracted 0.2 percentage points from GDP, as exports increased 1.8 per cent and imports rose 3.2 per cent.

Exports rose for the fourth consecutive quarter, with increases in services and goods exports. Services exports rose 7.7 per cent driven by travel services (+17.5 per cent) as the sector continued to recover from the COVID-19 pandemic.

"Travel services exports have now recovered to around 70 per cent of pre-pandemic levels,” Ms Keenan said.

Goods exports rose due to a rise in rural goods exports, which was partly offset by falls in coal exports.

Imports of goods rose 3.3 per cent. Consumption goods (+4.9 per cent) and capital goods (+5.3 per cent) drove this rise, partly offset by intermediate goods which fell 1.1 per cent.

Imports of services rose 3.1 per cent after a fall of 5.9 per cent in the December quarter. Both travel services (+7.1 per cent) and other services (+4.5 per cent) rebounded after falling in the previous quarter.