The Australian economy has grown more than expected over the last year,
as the country makes a successful transition away from its reliance on the
resources sector. According to the Australian Bureau of Statistics, economic
growth increased by 0.6 percent over the December quarter, with GDP up 3
percent for the year as Australia's economic output tops $1.6 trillion. While
disposable income and debt are still significant problems, a number of
promising indicators are pointing towards a brighter future.
Economic growth of 0.4 percent was expected for the December quarter, with 2.5 percent forecast for the year. Stronger than expected results have caught everyone off-guard, as the Australian economy continues to rebalance after years of mining-led growth. According to NAB's senior economist David de Garis "People were braced for a downside surprise, and obviously we didn't get that... If anything, the 3 percent figure for the year is getting the attention. That's half-a-percentage-point above where the RBA thought we'd be... Given Australia is going through the biggest mining pull-back in our lifetimes, this is a pretty good outcome. Our baseline is that the RBA is done cutting, and these numbers only support that view."
Consumer spending had the biggest effect over the quarter, with 0.5 percent growth recorded. Inventories were also up 0.2 percentage points, offset by a continued decline in business investment which took 0.2 percentage points off GDP. Construction, public administration and safety, and health care and social assistance also recorded strong growth, with residential building and the aging population also stoking demand. Treasurer Scott Morrison was one of the first people to highlight the significance of the figures, saying "We are growing faster than every economy in the G-7, we are growing faster than the United States and United Kingdom, and more than twice the pace of comparable resource-based economies like Canada."
Not everything is in good shape, however, with Australia's earnings steady and real gross domestic income up just 0.1 percent. National disposable income fell 0.3 percent during the quarter and is now down 1.2 percent for the year. Economic wellbeing has also been falling or flat for 16 consecutive quarters now, the longest period it has gone backwards since the ABS started calculating the figure in 1973. A decline in wages reflects a significant drop in commodity prices, which also puts downward pressure on company profits and government revenue growth. Concerns have also been raised about the state of debt in Australia, with the nation's collective debt sitting around $5.6 trillion.
While the economic situation is not all rosy, strong GDP figures are good news after decades of reliance on the resources sector. According to Reserve Bank of Australia (RBA) Deputy Governor Philip Lowe, "While none of these indicators suggests that we are on the cusp of a return to the type of growth rates we saw before 2008, they do suggest that the economy is successfully rebalancing following the mining investment boom... An important factor here will be whether the growth in aggregate demand continues to be sufficient to accommodate the growth in our labour force."
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