2 December 2015
Media Release - #2015017, 2015

September quarter National Accounts show positive transition underway

Today's National Accounts show that economic growth strengthened in the September quarter and that we are making a positive transition from the largest resources investment boom in our history to broader-based growth.

Real GDP grew 0.9 per cent in the September quarter and 2.5 per cent over the past year. This is a strong increase from the 1.9 per cent growth recorded in the year to the June quarter.

Australia's annual growth is double the rate of Canada, higher than the G7, and above the OECD average.

The key drivers of economic growth in the September quarter were net exports, household consumption and housing construction, more than offsetting the expected fall in business investment.

This composition of growth demonstrates the transition underway in our economy. That is why it is important that we remain focussed on growth friendly policies.

The sheer scale of the resources boom means that this transition will take time and there will be some challenges.

The Australian people understand this. They are already out there making changes, working hard every day to secure their future in a modern and dynamic economy.

But there are already some positive signs of a strengthening economy and signs that our economy is heading in the right direction.

The National Accounts show that the economy continues to see a moderate expansion.

Our economy has shown considerable ability to adjust, and to do so in a way that has preserved both overall economic and financial stability.

After the historic highs of investment in the construction phase of the mining boom and with the end of the labour intensive development phase in the mining industry, production in many major projects is now coming on line and the ramp-up in resources sector output is still under way.

The next phase of Australia's growth transition will be for businesses in the non-resources sectors of the economy to increase their investment. The conditions are in place for this to occur.

Following the GFC businesses have been consolidating their balance sheets and are well positioned to take a more active role in driving growth in the economy.

In domestic markets we can expect to see higher levels of confidence translate to stronger domestic demand that will encourage higher levels of non-mining investment.

As new markets open up for our exports, particularly in our expanding services sector, Australian businesses will see opportunity to invest in their productive capacity.

More and more Australian firms are experiencing success in developing and marketing their products, and experiencing success at penetrating overseas markets. The Government's Free trade Agreements and a more competitive Australian dollar facilitate this.

Exports of goods and services in the September quarter rose by 4.6% - the strongest growth in 15 years.

As these developments offer the prospect of increasing profits they will support increased capital spending and employment in the future.

Many businesses will first look to increase their labour force to fully utilise their existing capital stock. This is already occurring, with employment growth picking up significantly.

Job advertisements remain strong, and the unemployment rate is falling, especially youth unemployment that is now below the levels at the last election.

Employment is growing at the fastest annual pace in five years, workforce participation is rising.

This initial activity can be expected to be followed by investments in fixed capital such as plant and equipment.

Investment plans may initially be limited to the replacement of old machinery and equipment until firms in fast growing sectors invest to expand.

In this regard non-mining investment can be seen as a lag indicator, as business first adjusts to stronger domestic demand through their hiring policies before taking advantage of historic low interest rates to fully realise growth opportunities.

Encouragingly consumer confidence has increased, households are spending more and we are building a record number of new dwellings.

Continued growth in household income and rising wealth lifted household consumption by 0.7 per cent in the September quarter and has supported a pickup in retail trade over the past year, which is a good sign heading into the Christmas trading period.

We should expect that the adjustments we have seen in the exchange rate, labour market and interest rates will help create the environment that leads to increased investment.

Over the last seven years the Australian economy has experienced the biggest structural swings in a century.

While economic transitions of this magnitude are rarely seamless, the rebalancing continues to take place and the Australian economy is evolving to a broader base for future growth.

The Turnbull Government is backing those Australians who are working, saving and investing through our National Platform for Economic Growth and Jobs.