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ANALYSIS OF RESULTS
The September quarter 2015 issue of Australian National Accounts: National Income, Expenditure and Product (cat. no. 5206.0), to be released on 2 December 2015, will also incorporate these revisions.
Data from the SU tables are also 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).
The SU tables are not publicly available as they are an internal compilation tool of the ASNA that is used to generate balanced measures of GDP, implement revisions and facilitate construction of Input-Output tables.
OVERVIEW OF AUSTRALIAN ECONOMY IN 2013-14
The Australian economy expanded by 2.3% in 2014-15, although Real net national disposable income fell 0.1%. Terms of trade fell 10.3% in 2014-15, the biggest annual fall since the start of the time series in 1959-60.
The Household saving ratio was 9.2% for 2014-15, down from 9.7% in 2013-14. Market sector labour productivity increased 1.3%.
The major contributors to GDP growth in 2014-15 were Household final consumption expenditure, increasing 2.5%, contributing 1.4 percentage points to GDP growth, and Exports of goods and services, growing 6.5%, contributing 1.3 percentage points to GDP growth. Government final consumption expenditure increased by 1.3%, contributing 0.2 percentage points to GDP growth. This was partially offset by decreases in Private sector GFCF of 2.9% and Public sector GFCF, 5.5%. The level of inventories rose by $0.9 billion through 2014-15, contributing 0.2 percentage points to GDP growth, compared to a fall of $1.8 billion through 2013-14.
From an industry perspective, the largest increases in GVA in 2014-15 were recorded by Information media and telecommunications (9.4%), Mining (7.6%), Accommodation and food services (7.0%), Financial and insurance services (4.6%) and Health care and social assistance (4.5%). A number of industries saw declines for the year, including Professional, scientific and technical services (-4.0%) and Manufacturing (-1.2%).
For the Income components of GDP in 2014-15, there was growth in Compensation of employees of 2.4%, Taxes less subsidies on production and imports of 1.3% and Gross mixed income of 7.6%. Total gross operating surplus (GOS) decreased by 0.5%. The fall in GOS was driven by Private non-financial corporations (5.7%) and offset by growth experienced in Dwellings owned by persons (5.4%), Public non-financial corporations (7.6%), General government (4.7%) and Financial corporations (5.2%).
The annual movements for the chain price indexes for GDP and Domestic final demand were -0.2% and 1.7% respectively in 2014-15. The gap in price movements is reflected in the changes to the Terms of trade.
The Net worth of Australia is defined as the difference between Total assets and Total liabilities. Australia's Net worth at the end of June 2015 was estimated to be $10,510.6 billion in current prices, an increase of $718.9 billion (7.3%) since 30 June 2014.
GROSS DOMESTIC PRODUCT (GDP)
The latest annual result of 2.3% growth in GDP now sees 24 years of consecutive growth in the Australian economy. For some analytical purposes it is important to understand the impact of population growth on movements in GDP. In 2014-15, GDP per capita increased by 0.8%. Growth rates in GDP and GDP per capita are presented in the following graph.
Another measure of national economic activity is RNNDI. This measure adjusts the volume measure of GDP for the Terms of trade effect, Real net income from overseas and Consumption of fixed capital. In 2014-15, RNNDI decreased by 0.1%, reflecting a fall in the Terms of trade of 10.3%.
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 began trending downwards in the mid 1970s and reached a low of 0.0% in 2002-03. In 2014-15 the ratio was 9.2% down from 9.7% in the previous year.
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.
EXPENDITURE ON GDP
Total final consumption expenditure increased 2.2% in 2014-15, and contributed 1.6 percentage points to GDP growth.
Household final consumption expenditure (HFCE) increased 2.5% and contributed 1.4 percentage points to GDP growth in 2014-15. The main contributors to growth HFCE were Rent and other dwellings (2.4%), Recreation and culture (4.2%), Insurance and other financial (4.0%) and Hotels, cafes and restaurants (4.7%).
Government final consumption expenditure increased 1.3% in 2014-15, contributing 0.2 percentage points to growth in GDP. In recent years, Government final consumption expenditure has contributed between 0.0 and 0.7 percentage points to GDP growth.
Private investment decreased 2.9% in 2014-15, compared to a decrease of 0.9% in 2013-14. Private investment detracted 0.7 percentage points from GDP growth, down from last year's detraction of 0.2 percentage points. This fall was driven by decreased investment in Non-dwelling construction (-12.2%) which detracted 1.1 percentage points from growth in GDP.
Total dwellings investment increased 8.3% and contributed 0.4 percentage points to GDP growth in 2014-15. This is the second consecutive year of growth in total dwelling investment. The increase in 2014-15 was driven by investment in New and used dwellings (up 13.2%).
Public gross fixed capital formation decreased 5.5% and detracted 0.3 percentage points from GDP growth in 2014-15. This is the fifth consecutive year of falls in total public sector investment. The decrease in 2014-15 was driven by Public corporations (-13.8%) and General government (-1.9%).
Growth in the domestic economy as measured by Gross National Expenditure (GNE), which is the total expenditure within a given period by Australian residents on final goods and services, showed an increase in 2014-15 of 0.8%. The difference between GNE and GDP is due to a positive contribution from Net exports and the statistical discrepancy.
In 2014-15, the industry shares of current price Gross value added (at basic prices) were similar to 2013-14. The industries with the largest shares were Financial and insurance services, 9.3%, Construction 8.8% and Mining 7.2%. The industry share of GVA for Manufacturing decreased 11.3% to 6.8% since 2004-05, while Financial and insurance services increased from 8.0% to 9.3% in the same period and Mining increased from 5.5% to 7.2% since 2004-05.
INCOME FROM GDP
The Compensation of employees (COE) share of Total factor income remained relatively stable throughout the 1990s up until the mid 2000s. The highest recorded value of compensation of employees share of total factor income was 62.1% in 1974-75. In 2014-15 the shared COE reported a slight rise to 53.9%, from 53.6% in 2013-14.
The profits share (based on Gross operating surplus for Financial and Non-financial corporations) of Total factor income reached 25.8% in 2014-15, down from 27% in 2013-14. The highest share recorded was in 2008-09 of 28.8%. The profits share recorded since the late 1980s are at a distinctly higher level than those reported at any time since 1959-60. The profit share of total factor income 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.
In 2014-15, National net saving relative to Net disposable income (Gross disposable income less Consumption of fixed capital) was 7.6%. This ratio generally increased from 1959-60 to a peak in 1973-74 of 19.5%. The series then gradually decreased, eventually reaching its lowest point of 1.9% in 1991-92 before increasing to 11.9% in 2011-12. Since then, National net saving as a proportion of Net disposable income has gradually declined to the current 7.6%.
In 2014-15, Financial corporations net saving was $26.3 billion. General government net saving was -$21.7 billion and net saving for Non-financial corporations was $1.4 billion while Household net saving was $92.9 billion.
When analysing household saving it is useful to consider Household net worth, currently at $8,430.1 billion as of 30 June 2015. For more information please refer to Balance Sheets.
PRICES IN THE NATIONAL ACCOUNTS
Chain Price Indexes are used to measure price changes. The annual movement in the Domestic final demand chain price index for 2014-15 was 1.7%. The major components were Household final consumption expenditure (up 1.8%) and Gross fixed capital formation (up 2.1%). The annual movement in the GDP chain price index for 2014-15 was -0.2%, with the price of Exports of goods and services decreasing 8.3% and the price of Imports of goods and services increasing 1.0%.
On an hours worked basis, market sector multifactor productivity (MFP) grew 0.3% in 2014-15 reflecting a 2.2% increase in Gross value added and a 1.9% increase in total labour and capital inputs. Capital services grew 3.3% and hours worked grew 0.8%.
In 2014-15, labour productivity grew 1.3% on a hours worked basis. On a quality adjusted hours worked basis, labour productivity grew 0.7%. The weaker growth in quality adjusted labour productivity reflects a positive contribution from changes to labour composition, due to educational attainment and work experience.
Market Sector Productivity, Hours worked basis, percent change
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). For the 1998-99 to 2003-04 cycle, MFP in the market sector grew 1.0% per year on average. Gross value added grew 3.6% per year over the same period while total inputs grew 2.6% per year. For the 2003-04 to 2007-08 cycle, MFP declined 0.5% per year on average. While gross value added grew 3.7% per year, total inputs grew stronger at 4.2% per year between 2003-04 and 2007-08. For both productivity growth cycles combined (1998-99 to 2007-08), MFP growth averaged 0.3% per year on average. More detailed productivity estimates will be available in Estimates of Industry Multifactor Productivity, 2014-15 (cat. no. 5260.0.55.002), to be released on 4 December 2015.
Australia's net worth at the end of June 2015 was estimated to be $10,510.6 billion in current prices, an increase of $718.9 billion (7.3%) since 30 June 2014. Major contributions to this increase came from land ($524.9 billion), assets of shares and other equity ($135.2 billion) and non-dwelling construction ($114.1 billion). Holding gains contributed $530.8 billion, net capital formation contributed $155.4 billion and other changes in volume contributed $91.2 billion to the change in net worth.
Australia's net international investment position as at 30 June 2015 was a net foreign liability of $906 billion, up $21.9 billion (2.5%) on the position a year earlier.
Australia's real net worth rose 2.4% over the year ended 30 June 2015, down from the 2.5% growth over the previous year.
Balance sheets are produced in current prices for each institutional sector in the economy. Of these, the household sector had the highest net worth at $8,430.1 billion at 30 June 2015, an increase of $844 billion (11.1%) from the previous year.
INVESTMENT AT CURRENT PRICES
Investment represents about a quarter of the level of GDP. Understanding which sectors are investing and expanding their future economic capacity provides an insight into the underlying dynamics within the economy.
As a proportion of GDP, investment by Non-financial corporations fell during the 1970s and was reasonably stable through the 1990s. Investment by Non-financial corporations as a proportion of GDP started growing during the 2000s before peaking in 2012-13 at 16.4%. In 2014-15, investment by Non-financial corporations as a proportion of GDP was 13.5%.
Household investment (including dwellings owned by persons) as a proportion of GDP declined steadily between 1959-60 and 1974-75 then remained steady at around 10% of GDP until the mid 2000s where it consistently fell below 10% as overall growth in GDP outpaced growth in household investment. Since 2012-13 investment by households as a proportion of GDP has increased and in 2014-15 was 9.2%.
General government investment as a proportion of GDP was at its highest in the late 1960s and has trended down since then. It was 3.2% of GDP in 2014-15.
The highest ever level of Financial corporations investment, expressed as a proportion of GDP, was recorded in 1988-89 and 1989-90 (2.0%). It has generally fallen since then and was 0.7% of GDP in 2014-15.
In terms of the different asset types, in 2014-15, Private non-dwelling construction represented the largest percentage share at 30.1% of Total gross fixed capital formation, compared to the next largest, Private dwellings investment at 20.0%.
Over the past ten years, as a share of Total gross fixed capital formation, Non-dwelling construction has increased in both the public and private sectors. Private non-dwelling construction has increased from 18.1% to 30.1% of Total gross fixed capital formation.
At an industry level over the past ten years mining has increased its share of investment from 6.9% of Total gross fixed capital formation to 21.0%. Manufacturing's share of investment has decreased from 9.2% to 3.8% of Total gross fixed capital formation.
The importance of international trade to the Australian economy is illustrated by the following graph, which shows the ratios of Exports and Imports of goods and services to GDP in current prices since 1959-60. In 2014-15 the Exports ratio was 19.8% and the Imports ratio was 21.2%.
Since 2004-05 volumes of Imports have grown more strongly, up 69.7%, compared to 48.8% growth in volume of Exports.
Prices received for Exports again fell sharply, down 9.7%, whilst the prices paid for Imports rose 0.7% for the year 2014-15. The Terms of trade represents 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.
Since 2004-05 Export prices have grown 28.5% and Import prices have grown 4.9%. See Prices in the National Accounts for more details on Export and Import prices. In 2014-15 the Terms of trade decreased by 10.3%, following on from a decrease of 3.7% in 2013-14. This is the third consecutive decrease in the Terms of trade.
Net exports represent the difference between Exports and Imports. Net exports detract from GDP growth when the change in the volume of Imports has been greater than the change in the volume of Exports. In 2014-15, Exports were up 6.5% whilst Imports fell 0.1% in volume terms. Net exports contributed 1.4 percentage points to GDP growth.
In addition to the trade in goods and services, the flow of funds between Australia and overseas is an important component of the relationship with the rest of the world. Australia has generally been a net borrower of funds from overseas. In the national accounts, this situation is reflected by a negative value for net lending to non-residents. The last time Australia was a net lender of funds to the rest of the world was in 1972-73. The ratio of net borrowing from overseas to GDP in 2014-15 was -3.7%, down from -3.3% in 2013-14.
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