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ANALYSIS AND COMMENTS
On the expenditure side, the increase this quarter (in seasonally adjusted volume terms) was driven by Private gross fixed capital formation (adding 2.1 percentage points) and Household final consumption expenditure (adding 0.7 percentage points). Partially offsetting these rises were Changes in Inventories (detracting 0.8 percentage points), Net exports (detracting 0.6 percentage points) and Public gross fixed capital formation (detracting 0.4 percentage points).
REAL GROSS DOMESTIC INCOME
The real purchasing power of income generated by domestic production is affected by changes in import and export prices. Real gross domestic income adjusts the chain volume measure of GDP for the Terms of trade effect. The graph below provides a comparison of quarterly movements in trend GDP (volume measure) and Real gross domestic income. In seasonally adjusted terms, during the September quarter, Real gross domestic income rose 1.6%, while the volume measure of GDP increased by 1.0%, the difference reflecting an increase of 2.7% in the Terms of trade.
TERMS OF TRADE
The Terms of trade represent the relationship between the prices of exports and imports. An increase (decrease) in the Terms of trade reflects export prices increasing (decreasing) at a faster rate than import prices. The Terms of trade rose 2.7% in seasonally adjusted terms in the September quarter following a 5.8% increase in the June quarter.
REAL NET NATIONAL DISPOSABLE INCOME
A broader measure of change in national economic well-being is Real net national disposable income. This measure adjusts the volume measure of GDP for the Terms of trade effect, Real net incomes from overseas and Consumption of fixed capital (see Glossary for definitions). The graph below provides a comparison of quarterly movements in trend GDP (volume measure) and Real net national disposable income. During the September quarter, seasonally adjusted Real net national disposable income increased 1.9%. Growth over the past 4 quarters was 6.0% compared with 2.5% for GDP.
NET EXPORTS CONTRIBUTION TO GROWTH
Net exports represents the difference between exports and imports of goods and services. Net exports detract from GDP growth when the change in the volume of imports is greater than the change in the volume of exports. In seasonally adjusted terms, Net exports detracted 0.6 percentage points from GDP growth in the September quarter 2011 compared with -0.3 percentage points in the June quarter 2011.
HOUSEHOLD SAVING RATIO
The Household saving ratio was 10.1% in seasonally adjusted terms in the September quarter 2011. The trend estimate for Household saving was 9.9% in the quarter.
Household saving is not measured directly. It is calculated as a residual item by deducting Household final consumption expenditure from Household net disposable income. As the difference between the two aggregates is relatively small, caution should be exercised in interpreting the Household saving ratio in recent years, because major components of household income and expenditure may be subject to significant revisions. The impact of these revisions on the saving ratio can cause changes in the direction of the trend. For more information on the Household saving ratio, see Spotlight on National Accounts, 2007-Household Saving Ratio (cat. no. 5202.0).
PRICES IN THE NATIONAL ACCOUNTS
The GDP chain price index increased 0.7% in the September quarter.
The chain price index for Household final consumption expenditure (HFCE) increased 0.7% in the September quarter 2011, compared with an increase of 0.6% in the Consumer Price Index (CPI) over the same period. The HFCE chain price index is the National Accounts measure most directly comparable to the CPI. However, it should be noted that the conceptual bases for these two price measures are different. The most important differences are
The Chain price index for Private gross fixed capital formation decreased 0.1% this quarter. The main contributor was Machinery and equipment, decreasing 0.7%. This decrease was partially offset by a rise in the Chain price index for Total non-dwelling construction (0.2%).
The Domestic final demand chain price index, encompassing changes in both consumption and investment prices, increased 0.2% in the quarter and 1.4% through the year.
The Export Chain price index increased 2.4% during the quarter, and 9.1% through the year. Import prices increased 0.5% in the September quarter but decreased 2.7% through the year.
NATIONAL ACCOUNTS LABOUR MARKET INDICATORS
The National Accounts dataset contains a number of labour market related indicators. Labour costs are the costs incurred by employers in the employment of labour. These costs include wages and salaries, bonuses, paid leave, superannuation, taxes on employment, training and recruitment costs, and fringe benefits (included in wages and salaries in the national accounts). They are of particular interest as they impact on the competitiveness of organisations, employers' willingness to employ and individuals' willingness to supply labour.
Labour costs are reflected in household income via Compensation of employees and therefore have a significant impact on household consumption, investment and saving decisions.
In the September quarter 2011, seasonally adjusted Compensation of employees rose 1.6%, and the seasonally adjusted number of employees recorded in the Labour Force survey was flat. Average compensation per employee increased 1.6%.
In trend terms, Hours worked increased 0.3% during the quarter with through the year change at 1.7%. In the Market sector (see Glossary for definition) Hours worked rose during the quarter (0.2%) with through the year change at 1.4%. In the September quarter 2011, GDP per hour worked (in trend terms) rose 0.4%. Market sector Gross value added (GVA) per hour worked (in trend terms) rose 0.6% in the quarter and by 0.3% through the year. Estimates of GDP per hour worked are commonly interpreted as changes in labour productivity. However, it should be noted that these measures reflect not only the contribution of labour to changes in production per hour worked, but also the contribution of capital and other factors (such as managerial efficiency, economies of scale, etc.).
The graph below presents quarterly growth rates in trend GDP and hours worked. The ABS has produced analysis concerning the relationship between GDP and hours worked. For more information please refer to Leading Indicators of Employment (Feature Article in Australian Economic Indicators cat. no. 1350.0, April 2004) and the Research Paper: Analysing the Terms of Trade Effect on GDP and Employment in the Presence of Low Real Unit Labour Costs (cat. no. 1351.0.55.014).
Unit labour costs (ULC) represent a link between productivity and the cost of labour in producing output. A nominal ULC measures the average cost of labour per unit of output while a Real ULC adjusts the nominal ULC for general inflation. Positive growth in a real ULC indicates that labour cost pressures exist. In the September quarter 2011, the trend Real ULC increased 0.3% while the trend Non-farm Real ULC increased 0.2%. The Non-farm measure is generally preferred as it removes some of the fluctuations associated with Agriculture.
CHANGES IN INVENTORIES
Changes in inventories can have a significant impact on growth in quarterly GDP. A positive changes in inventories can be seen as production increasing at a faster rate than consumption but the exact reasons underlying changes in inventories can be far more complex. For example, firms may run up or run down inventories in anticipation of future sales, supply constraints could affect inventories, or firms may under or over estimate sales in a particular period.
The graph below shows GDP growth and the Changes in inventories contribution to GDP growth, both in trend terms. Even in trend terms the Changes in inventories contribution to GDP growth is quite volatile.
Changes in inventories can be disaggregated into a number of industries. The graph below shows the three largest inventory holding industries, Manufacturing, Wholesale trade and Retail trade. In seasonally adjusted terms, Wholesale trade has experienced a run down in volume of inventories in the September quarter 2011. There has also been a run down in the seasonally adjusted volume of inventories in Other non-farm this quarter. The Mining industry is the main contributor to Other non-farm inventories.
RELIABILITY OF CONTEMPORARY TREND ESTIMATES
Trend estimates are used throughout this publication to analyse movements in time series data. Details regarding the procedures used to estimate the trend series are described in the Explanatory Notes (paragraphs 13 - 17) and in Information Paper: A Guide to Interpreting Time Series-Monitoring Trends, 2003 (cat. no. 1349.0). Potential revisions to trend estimates can be indicated by showing the effects of particular changes in seasonally adjusted estimates that might occur in the next quarter. The table below shows the trend estimates for the last ten quarters and the values to which they would be revised if the given movements in seasonally adjusted GDP actually occurred in December quarter 2011. In the absence of any other revisions, seasonally adjusted growth of 0.1% is required in December quarter 2011 to maintain, in December quarter 2011, the trend growth of 0.8% currently estimated for the September quarter 2011.
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