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Feature Article - Quarterly Review
1 INTERNATIONAL ECONOMIC GROWTH, GDP VOLUME TREND, Quarterly % change
The chain volume measure of GDP is essentially a measure of the volume of output produced within Australia. However, the total real income that Australians derive from this production also depends on the volume of imports able to be purchased from the proceeds of Australia’s exports to the rest of the world. Over the past year, Australia’s terms of trade have increased by 8.0%, so a given volume of exports will enable Australians to purchase a higher volume of imports than was the case in March quarter 2004. Real gross domestic income (GDI) measures the purchasing power of the total incomes generated by domestic production, taking changes in the terms of trade into account. Through the year to March quarter 2005, trend real GDI has increased by 3.2% compared with an increase of 1.5% in the trend chain GDP volume. See also graph 21 below.
2 CHAIN VOLUME OF GDP AND REAL GDI, Trend—Annual % change
Most industries made positive contributions to production chain volume measures in the March quarter 2005 (graph 3). The strongest quarterly increases were from transport and storage (up 1.8%), finance and insurance (up 1.2%), government administration and defence (up 1.1%) and ownership of dwellings (up 1.0%). Six industries declined, with the largest falls in accommodation, cafes and restaurants (down 0.6%), property and business services (down 0.5%) and agriculture, forestry and fishing (down 0.4%).
3 GROSS VALUE ADDED BY INDUSTRY, Trend—Quarterly % change—March Qtr 2005
The severe drought conditions affecting agricultural production volumes across the eastern states have resulted in weak rural exports in the March quarter. Graph 4 shows how rural goods exports have declined over time as a percentage of total goods exports. Rural exports fell 4.6% in the March quarter to $6.6b, despite solid export prices. This follows falls of 6.9% in the December 2004 quarter and 5.1% in the September 2004 quarter (see table 2.3, page 32). This has been a key factor in the record current account deficit (see graph 30).
4. RURAL GOODS EXPORTED TO TOTAL GOODS, Chain volume measure, Seasonally adjusted
In the March quarter 2005 the chain volume measure of household final consumption expenditure (HFCE) grew by 0.7% in trend terms and 0.8% in seasonally adjusted terms (graph 5). The strongest trend growth rates were recorded for purchase of vehicles, up 2.0% and electricity, gas and other fuel, up 1.6%. Household purchases from hotels, cafes and restaurants fell by –0.9% in trend terms (due to cafes and restaurants), while operation of vehicles fell by 0.6%. These were the only two components which fell. The reduced consumption in cafes and restaurants may be due to the discretionary nature of this type of consumption, and increasing interest rates cutting into budgets. The fall in accommodation, cafes and restaurants is also shown in the gross value added by industry figures in graph 3.
5 HOUSEHOLD FINAL CONSUMPTION EXPENDITURE, Chain volume measure—Quarterly % change
The trend chain volume measure of national general government final consumption expenditure (GFCE) excluding defence rose 0.2% in the March quarter 2005 (graph 6). The trend rose 1.9% between March 2004 and March 2005. The trend chain volume measure of defence final consumption expenditure rose by 0.2% in the March quarter, and rose 3.5% between March quarter 2004 and March quarter 2005.
6 GOVERNMENT FINAL CONSUMPTION EXPENDITURE, (Excluding defence) Chain volume measure—Quarterly % change
In the March quarter 2005, retail turnover rose by 0.5% in trend chain volume terms, following an increase of 0.7% for the December quarter 2004. Five of the seven industries showed increases this quarter, with household good retailing up 3.3%, clothing and soft good retailing up 1.9%, recreational good retailing up 1.1%, department stores up 1.0% and other retailing up 0.4%. Hospitality and services fell by 1.2% and food retailing fell 0.5%, associated with the reduced consumption of these goods and services identified above.
7 RETAIL TURNOVER, Chain volume measure, Trend—Quarterly % change
The trend estimate for sales of new motor vehicles (excluding motor cycles) rose by 0.2% from March 2005 to 83,620 in April 2005 (graph 8). It is the sixteenth consecutive monthly increase in the trend estimate. When compared with April 2004 (78,350) the trend estimate has shown an increase of 6.7%. The trend estimate for sales of passenger vehicles and other vehicles each recorded an increase of 0.2% over the last month, while sales of sports utility vehicles increased 0.1%. The majority of states and territories recorded increases in trend estimates for sales of new motor vehicles in April 2005 compared to March 2005. Victoria (-0.8%), Tasmania (-1.1%) and ACT (-0.3%) were the only states or territories to record decreases.
8 NEW MOTOR VEHICLE SALES, Number per month
The trend chain volume measure of total gross fixed capital formation (GFCF) rose by 0.5% in the March quarter 2005, following rises in the previous fifteen quarters (graph 9). This had been preceded by four quarters of decline. The trend is now 5.1% above that of the March quarter 2004. The seasonally adjusted estimate fell 1.6% in the March quarter 2005. A fall in seasonal figures is unusual, but it followed relatively strong growth in the December quarter.
9 TOTAL GROSS FIXED CAPITAL FORMATION, Chain volume measure— Quarterly % change
The trend chain volume measure of both total public and total private gross fixed capital formation rose by 0.5% in the March quarter 2005 (graph 10). In the private sector, dwellings fell by 2.0%, non-dwelling construction rose by 2.3%, and machinery and equipment rose 1.2%. Livestock rose by 1.2%, intangible fixed assets rose by 1.0% and ownership transfer costs fell by 2.6%. For public GFCF, public corporations rose by 0.6%, national general government fell by 0.6%, and state and local general government rose by 0.5%.
10 PRIVATE GROSS FIXED CAPITAL FORMATION (PGFCF), Chain volume measure—Quarterly % change
Trend total GFCF for private dwellings fell by 2.0% in the March quarter 2004 (graph 11). New and used dwellings fell by 2.3% while alterations and additions fell by 1.4%. Expenditure on non-dwelling construction rose by 2.3%. There was a 4.4% increase in new engineering construction and a 1.7% rise in new building.
11 PRIVATE GFCF: SELECTED COMPONENTS, Chain volume measure, Trend—Quarterly % change
The trend chain volume measure of the value of building approvals fell by 0.7% in the March quarter 2005. There was a 1.7% fall in total residential building while non-residential building rose by 0.3%. New residential building fell 1.6% while alterations and additions to residential buildings fell 2.1% (graph 12). The fall in new residential building was due to a 1.5% fall in new houses and a fall of 1.4% in new other residential building. Some building approvals do not proceed, and there is a lag of a few months until work occurs for those that do. Also, interest rate changes influence approvals (see the feature article on the relationship between changes in interest rates and building approvals in the November 2001 issue of AEI).
12 VALUE OF RESIDENTIAL BUILDING APPROVALS, Chain volume measure, Trend—Quarterly % change
In May 2005 employment continued to grow, although the rate of growth is slowing, while unemployment is still very low.
In May 2005, the trend total number of employed persons increased 0.2% from the previous month to 9,983,300. Female employment rose 0.2% to 4,469,600 while male employment rose 0.2% to 5,513,800 (graph 13). Full-time employment rose 0.2% to 7,130,200 while part-time employment rose 0.2% to 2,853,100.
13 EMPLOYMENT, Trend—Monthly %change
In May 2005, the trend unemployment rate remained steady at 5.1%. The male unemployment rate remained steady at 4.9% and the female unemployment rate rose 0.1 percentage points to 5.5% (graph 14). In May 2005 the number of persons looking for full-time work rose marginally to 382,800 and the number of persons looking for part-time work rose 1.2% to 158,200.
14 UNEMPLOYMENT RATE, Trend
In May 2005, the overall participation rate rose 0.1 percentage point to 64.6%. The female participation rate rose 0.1 percentage point to 57.1% (graph 15) while the male participation rate rose 0.1 percentage point to 72.3% (graph 16).
15 FEMALE PARTICIPATION RATE, Trend
16 MALE PARTICIPATION RATE, Trend
The trend chain volume measure of market sector GDP per hour worked fell by 0.5% in the March quarter 2005 (graph 17). Hours worked in the market sector rose by 0.7% and market sector GDP rose 0.4%. Market sector GDP per hour worked is a measure of labour productivity and in trend terms this is the fourth consecutive quarter to show a fall. Note however that this measure is also affected by the contribution of capital and other factors to changes in production as well as changes in the overall quality of labour input.
17 LABOUR PRODUCTIVITY (PROXY) TREND, GDP Market sector, Chain volume measure—Quarterly % change
In the March quarter 2005, the wages share of total factor income rose to 53.5% (graph 18). Compensation of employees rose by 1.8%, reflecting a rise of 1.0% in average earnings and a 0.8% rise in the number of wage and salary earners.
18 WAGES SHARE OF TOTAL FACTOR INCOME, Trend
In the March quarter 2005, the profits share of total factor income remained steady at 26.8% (graph 19). This profit measure comprises the gross operating surplus (GOS) of financial and non-financial corporations, which rose by 1.3% in the March quarter following a 1.6% rise in the December quarter 2004.
19 PROFITS SHARE OF TOTAL FACTOR INCOME, Trend
The household saving ratio was negative in the March quarter 2005, implying that household consumption was greater than household disposable income. In trend terms the ratio was –3.3% (graph 20). This ratio is being driven by expenditure growing faster than disposable income. Caution should be exercised in interpreting the household saving ratio in recent years, because major components of household income and expenditure may still be subject to significant revisions. The impact of these revisions on the saving ratio can cause changes in the apparent direction of the trend.
20 HOUSEHOLD SAVING RATIO, Trend
During the March quarter 2005 trend real net national disposable income rose by 0.5%, compared to the increase in the trend chain volume measure of GDP of 0.4% (graph 21). Real net national disposable income (RNNDI) is a broad measure of economic well-being. This measure adjusts the chain volume measure of GDP for the terms of trade effect, real net incomes to the rest of the world and consumption of fixed capital.
For further details about RNNDI see the feature article in the April 2002 issue of AEI.
21 GDP AND REAL NET NATIONAL DISPOSABLE INCOME, Chain volume measure, Trend—Quarterly % change
This commentary refers to original estimates unless otherwise specified.
In the March quarter 2005, the all groups consumer price index (CPI) rose by 0.7%, compared with a rise of 0.8% in the December quarter 2004 (graph 22). The major increases at the group level were education (up 6.0%), health (up 4.0%), alcohol and tobacco (up 1.3%) and housing (up 1.0%). The clothing and footwear (down 1.4%) and household furnishings, supplies and services (down 1.3%) groups provided the largest offsetting price decreases.
22 CONSUMER PRICE INDEX, Quarterly % change
Graph 23 shows the major contributors to the change in the CPI for the March quarter. The 16.8% rise in pharmaceuticals contributed 0.24 index points to the rise in the CPI and was partly due to an increase of around 20% in the patient co-payment for PBS prescription pharmaceuticals from 1 January. The 1.4% increase in house purchase contributed 0.18 index points to the rise in the CPI and was driven by increasing labour costs and material costs. The 4.2% price rise in domestic holiday travel and accommodation was due to the seasonal increase in holiday accommodation tariffs, and Easter occurring in March this year. The 2.7% fall in automotive fuel may seem at odds with the high price levels currently being observed, but an analysis of this is provided in the Technical Note on page 9.
23 MAJOR CONTRIBUTIONS TO CHANGE IN THE CPI, Quarterly contribution to change— March Qtr 2005
At the All groups level, the March quarter 2005 CPI rose in all capital cities (graph 24). The increases ranged from 0.5% in Canberra to 0.9% in Hobart. The higher result for Hobart was mainly due to that city recording percentage movements in food, clothing and footwear, household furnishings, supplies and services and recreation that were well above the national average.
24 ALL GROUPS, Quarterly % change—March Qtr 2005
The national accounts domestic final demand chain price index rose 0.7% in the March quarter 2005, following a rise of 0.8% in the December quarter (graph 25). The domestic final demand chain price index is a broad based measure of price change and comprises final consumption and capital expenditure, for both private and public sectors. The chain price index for final consumption expenditure rose by 0.8% (by 0.8% for households and 0.9% for general government), while the chain price index for gross fixed capital formation rose by 0.4%, (by 0.3% for private and by 0.4% for public).
25 DOMESTIC FINAL DEMAND CHAIN PRICE INDEX, Quarterly % change
This commentary refers to original estimates unless otherwise specified.
The final (Stage 3) stage of production price index recorded no change in the March quarter 2005 (graph 26). For the final (Stage 3) index, there was a rise of 0.4% in domestic commodities and a 2.2% fall in imported commodities due to exchange rate driven price falls for both consumer and capital goods. The intermediate (Stage 2) stage of production index fell by 0.5%, due to a fall of 0.3% in the domestic component and a 2.2% fall in the imports component. The preliminary (Stage 1) stage of production producer price index fell by 0.7%, due to a fall of 0.4% in the domestic component and a fall of 2.6% in the imports component.
26 STAGE OF PRODUCTION INDEXES, Quarterly % change
In the March quarter 2005, the price index of materials used in manufacturing industries fell by 3.0% (graph 27). There was a 0.2% fall in domestic materials and a 5.7% fall in imported materials. Falls in the price of crude oil (both domestic and imported), cattle and calves, and plastic materials were the main contributors to the quarterly result. Price increases for flat rolled iron and steel products, and whole milk products provided some offsets.
27 MANUFACTURING INDUSTRY PRICE INDEXES, Quarterly % change
The price index for materials used in house building rose by 0.7% in the March quarter 2005 (graph 28), reflecting price increases for a range of materials. The most significant contributors to the increase were softwood, plastic pipes and fittings, terracotta tiles and concrete tiles. Small offsetting price falls were recorded for clay bricks and ceramic sanitaryware. Increases were recorded in all state capitals, ranging from 0.2% in Brisbane to 1.2% in Perth. Through the year to March quarter 2005, the price index for materials used in house building rose 3.6%.
28 MATERIALS USED IN HOUSE BUILDING, Quarterly % change
The export price index fell by 0.5% in the March quarter 2005 (graph 29). The most significant contributors to the decrease were crude petroleum oils, gold, frozen beef and petroleum gases. The decreases for all commodities were partially driven by the appreciation of the Australian dollar against all major currencies. The most significant offsetting price increases were observed for coal and semi-coke, alumina, and zinc ores and concentrates.
The import price index fell by 2.4% in the March quarter 2005 (graph 29). The most significant contributors to the decrease were crude petroleum oils, transmission apparatus, medicaments, parts for telecommunications equipment, and parts for automatic data processing machines. The decreases were partially driven by the appreciation of the Australian dollar against all major currencies. The most significant offsetting price increases were observed for unclad rolled iron and steel, and diamonds.
29 EXPORT AND IMPORT PRICE INDEXES, Quarterly % change
In the March quarter 2005 the trend current account deficit was $16.1b. This was an increase of $1.0b (7%) on the December quarter 2004 deficit (graph 30). The main contributors to the increase in the deficit were income debits, which rose $774m (6%), goods debits, which rose $376m (1%), services debits, which rose $199m (2%) and goods credits, which fell $54m. These effects were partly offset by increases in services credits of $246m (3%) and income credits of $146m (3%). The trend estimate of the net income deficit increased $0.6b (8%) to $8.7b.
30 CURRENT ACCOUNT,MAIN AGGREGATES, Current prices, Trend
The trend estimate of the balance on goods and services at current prices was a deficit of $7.3b, an increase of $0.4b (6%) on the December quarter 2004 deficit (graph 30). The value of goods that Australia imports (debits) reached $37.7b in the December quarter 2004, while goods exported (credits) fell slightly to $30.7b (graph 31). The trend estimate of net services was a deficit of $0.3b, a small fall on the December quarter 2004 deficit .
31 BALANCE OF PAYMENTS, GOODS AND SERVICES, Current prices, Trend
Australia’s net international investment position rose $13.5b to a net foreign liability of $554.7b at 31 March 2005. Net debt liabilities were $424.7b, an increase of $3.3b (0.8%), as net debt raisings of $9.7b were mainly offset by exchange rate changes of –$2.8b, price changes of –$2.7b and other adjustments of –$0.8b. Net equity liabilities rose by $10.2b (8.5%), to $130.0b (graph 32), reflecting price changes of $6.2b, transactions of $3.6b and other adjustments of $0.6b. Partially offsetting the increase was exchange rate changes of –$0.3b.
32 INTERNATIONAL INVESTMENT POSITION, Levels at end of period
Graph 33 shows the Trade Weighted Index (TWI) of the value of the $A. In the March quarter 2005 the quarterly average TWI rose to 63.7 (from 62.8 in the previous quarter). The period average exchange rate for the Japanese yen rose to 81.17 per $A(from 80.04 in the previous quarter), and the period average exchange rate for the United States dollar rose to 0.7771 per $A (from 0.7566 the previous quarter).
33 TRADE WEIGHTED INDEX OF VALUE OF THE $A, Quarterly Average, May 1970=100
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