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Analysis of results
The September quarter 2019 issue of Australian National Accounts: National Income, Expenditure and Product (cat. no. 5206.0), to be released on 4 December 2019, will also incorporate these revisions.
The SU tables (cat. no. 5217.0) are publicly available for download on the ABS.Stat website (http://stat.data.abs.gov.au/). Data from the SU tables are used to construct Australian National Accounts: Input-Output Tables (cat. no. 5215.0.55.001), which present structural detail underlying the Australian economy and provide weighting patterns for Producer Price Indexes, Australia (cat. no. 6427.0).
Overview of the Australian economy in 2018-19
The Australian economy expanded by 1.9% in chain volume terms in 2018-19, the 28th consecutive year of economic growth. Real net national disposable income grew 3.3%, reflecting the strength in the terms of trade, which increased 5.6% in 2018-19 following an increase of 1.9% in the previous year. Labour productivity in the market sector fell 0.2%. The household saving ratio fell to 3.0%.
Economic growth was driven by domestic final demand, which contributed 1.5 percentage points to GDP growth. Inventories detracted 0.2 percentage points, while net trade in goods and services added 0.8 percentage points. Household final consumption expenditure rose 1.9% in 2018-19, the lowest annual growth since 2012-13. The easing growth in household consumption was driven by discretionary spending, which declined from 3.3% in 2017-18 to 1.4% in 2018-19. Purchase of vehicles fell for the first time since 2008-09, while spending on hotels, cafes and restaurants (1.6%) and furnishings and household equipment (1.1%) were subdued.
Government final consumption expenditure grew 4.2%, above its 10 year average of 3.0%. This growth was sustained by ongoing expenditure in health, aged care and disability services. Public investment grew 3.3%, the fourth consecutive year of growth, reflecting continued infrastructure investment by state and local general government.
Market sector gross value added rose 1.3%, recording its slowest growth ever despite thirteen of sixteen market sector industries recording rises. Mining gross value added increased 6.1% and was the main contributor to market sector GVA growth. Oil and Gas Extraction increased 19.0%, as new facilities came online over the year. Net capital stock of mining assets declined for the first time, reflecting the transition of LNG facilities from investment into production. Increased LNG production contributed to the rise in exports with net trade contributing 0.8 percentage points to GDP growth. The terms of trade increased 5.6% driven by mining commodity prices namely iron ore. Mining profits rose 26.4% in 2018-19 due to increased production volumes of LNG coupled with high commodity prices.
The chain price indexes for GDP and domestic final demand increased 3.3% and 2.0% respectively in 2018-19. The gap in price movements reflected the increase in the terms of trade.
The annual Australian National Accounts includes balance sheets by sectors providing insights into net worth positions. Household net worth increased $47.7 billion to $10.5 trillion in 2018-19, while the general government remained relatively unchanged at $1.6 trillion.
Australian economy grows by 1.9%
Australian Gross Domestic Product (GDP) grew by 1.9% in 2018-19, remaining unchanged from the annualised growth published in the June quarter 2019 national accounts. GDP per capita growth eased to 0.3%, the lowest annual rate of growth since 2009-10.
GDP and GDP per capita, Volume measures
Domestic final demand drives economic growth in 2018-19
Domestic final demand contributed 1.5 percentage points to GDP growth. Household and government consumption contributed 1.1 and 0.8 percentage points respectively, while total gross fixed capital formation detracted 0.3 percentage points. Net exports contributed 0.8 percentage points which was driven by exports of goods and services.
Contributions to GDP(E) growth, Volume measures
Note: Contributions may not add to GDP growth due to the statistical discrepancy.
Household consumption growth the weakest in 6 years
Household final consumption expenditure recorded growth of 1.9% in chain volume terms in 2018-19. Spending on essential items continued to grow modestly, while discretionary spending slowed.
Household final consumption expenditure, Volume measures
Household saving ratio declines further
The household saving ratio is another key aggregate in the national accounts. Household saving cannot be measured directly. It is calculated by deducting household final consumption expenditure from household net disposable income.
The household saving ratio fell to 3.0 in 2018-19, the lowest annual saving rate in eleven years. The fall in household net saving can be attributed to the subdued rise in household final consumption expenditure outpacing soft growth in gross disposable income. Gross disposable income was impacted by a substantial increase in income tax payable.
Household saving ratio
The softest growth in household loan liabilities in over 25 years
The value of land and dwellings held by households was 2.9 times the value of household borrowing in 2018-19, decreasing from 3.1 in 2017-18. The value of land and dwellings owned by households fell 3.8% (-$265.1 billion) to $6,687 billion, the first decrease since 2011-12, reflecting the declining residential property prices through the year. This was driven by falls in the value of land (-$326.0 billion), while the growth rate of the value of dwellings (3.1%) was the softest since 2011-12. The tighter lending environment and weak housing market in 2018-19 also impacted the demand for loans by households. Household loan liabilities grew 3.8% ($85.7 billion), the softest growth rate since 1991-92.
Household land and dwelling assets relative to loans ratio
Household living standards soften due to slowing housing market
Living standards and economic well-being are supported by wealth as well as income. The growth rate of gross disposable income has slowed in recent years. However, households reap gains and incur losses from holding assets, such as land, dwellings, equities and accumulated saving, which also bears on consumption patterns.
Household gross disposable income plus other changes in real net wealth decreased $361 billion, or 27.4%, in 2018-19. Gross disposable income grew modestly at 2.8% to $1.2 trillion, while final consumption expenditure grew 3.7% to $1.1 trillion. Real holding gains on financial assets were $140.2 billion driven by increases in superannuation assets. However, this growth was offset by $457.7 billion of real holding losses on land, reflecting decreasing residential property prices through the year.
Household income and wealth, Current prices
Mining investment shifts away from non-dwelling construction to machinery and equipment
Non-dwelling construction, as a proportion of total mining investment, has fallen for the third consecutive year. This reflects the transition of large LNG projects from construction into the production phase.
Over the same period, the contribution of machinery and equipment investment has increased from 8.9% to 19.9%. This is driven by investment in autonomous machinery as existing projects seek to enhance productive capacity.
Investment in mining intellectual property products increased to 10.0% of mining investment in 2018-19, reflecting increased mineral and petroleum exploration driven by global demand for resources.
Asset shares of mining gross fixed capital formation, Current prices
Mining net capital stock declines for the first time
The net capital stock of the mining industry declined by 0.2% in 2018-19. This is driven by falling investment in non-dwelling construction and research and development over the last five years, as facilities have progressively entered into production.
Net capital stock - Mining, Volume measure
Mining share of output continues to grow as gas production increases
The Australian economy has changed dramatically over the past 20 years as reflected by changes in contribution to gross value added. In 2018-19 the industries with the largest share of current price gross value added (at basic prices) were Mining (10.2%), Financial and Insurance Services (9.3%) and Construction (8.0%).
Mining recorded growth of 6.1% in 2018-19, driven by Oil and Gas Extraction. Continued strength in Oil and gas extraction is due to new sites coming online during the year. The transition of these facilities from construction into production has had downstream impacts on the construction industry. Construction gross value added fell 3.4% driven by Heavy and Civil Engineering Construction, reflecting a decline in work on the development of LNG facilities.
Financial and Insurance Services rose 2.0% in 2018-19. The increase was driven by Other Financial and Insurance Services due to an increase in funds under management while Finance rose due to modest growth in loan and deposit balances.
Health Care and Social Assistance rose 7.4% in 2018-19, reflecting strong public expenditure in the health industry.
Industry shares of gross value added - Selected industries, Current prices
Note: GVA at basic prices of industries as a proportion of total GVA at basic prices
Compensation of employees share of total factor income falls
In 2018-19 compensation of employees (COE) share of total factor income fell to 52.1%, recording its lowest level in ten years.
Profit's share (based on gross operating surplus for corporations) of total factor income was 28.7% in 2018-19. This is slightly below the peak of 29.0% seen in 2008-09.
Mining was the major contributor to the rise in profit share of total factor income. Mining profits rose 26.4% in 2018-19 due to increased production volumes of LNG coupled with high commodity prices. The profit share measure should not be interpreted as a direct measure of 'profitability' for which it is necessary to relate profits to the level of capital assets employed.
Wages share of total factor income
Profits share of total factor income
Record level of mining exports
The nominal contribution of mining commodity exports has overtaken the contribution of exports of all other goods and services relative to GDP for the first time in history.
The increased value of exports of mining commodities (26.3%) in 2018-19 was driven by other mineral fuels, mineral ores (iron ore) and coal.
The value of exports of non-mining goods and services rose a more moderate 7.8%. The increase was driven by travel services, metals and metal manufacturing. This growth was partly offset by a fall in exports of cereals.
Exports relative to GDP, Current prices
Market sector multifactor productivity decreases
On an hours worked basis, market sector multifactor productivity (MFP) fell 0.4% in 2018–19, the first decline since 2010-11. Market sector gross value added of 1.3% was the slowest output growth ever recorded for the market sector. By comparison, combined labour and capital inputs grew 1.6%, reflecting capital services growth of 1.8% and hours worked growth of 1.5%. Labour productivity fell 0.2% in 2018–19, the first recorded negative for the market sector aggregate.
On a quality adjusted hours worked basis, MFP fell 0.7% and labour productivity fell 0.8%. The weaker growth on this basis reflects a positive contribution from changes to labour composition, due to educational attainment and work experience.
Productivity growth - Hours worked basis
Productivity Growth Cycles
A common method of examining changes in productivity over an extended period involves identifying and dividing the data into productivity ‘growth cycles’ (see Glossary). A new growth cycle has been added for the period 2011-12 to 2017-18.
Composition of national net saving shifts
Total national net saving increased by $14.9 billion in 2018-19, recording a third consecutive year of growth. The growth in 2018-19 was driven by a $12.3 billion increase in general government net saving and an $11.2 billion increase in non-financial corporations net saving. Offsetting this was a continued decline in household net saving, which decreased by $7.8 billion in 2018-19. Net saving of financial corporations remained relatively flat with a decrease of $823 million.
Over the five year period since 2014-15, the composition of sectors driving growth in national net saving has shifted, with a continued decline in the household net saving position offset by strong growth in general government net saving and to a lesser extent growth in non-financial and financial corporations net saving.
Since 2014-15, household net saving has declined by $46.4 billion. This gradual fall has been driven by strong growth in income taxes payable, combined with continued growth in household final consumption expenditure outweighing modest growth in primary income receivable, including compensation of employees and gross operating surplus on ownership of dwellings.
General government net saving has increased by $47.8 billion over the five years since 2014-15. This growth is being driven by continued strength in income taxes receivable from both households and corporations outweighing growth in final consumption expenditure and other income payable.
Net saving by sector, Current prices
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