ANALYSIS


AUSTRALIAN ECONOMY GREW BY 0.2%

Australia's gross domestic product (GDP) grew by 0.2% in the December quarter 2018, following a 0.3% rise in the September quarter. The Australian economy grew 2.3% through the year.

CONTINUED STRENGTH IN GOVERNMENT EXPENDITURE

Government final consumption expenditure rose 1.8% in the December quarter 2018 and remains strong through the year at 5.6%. National non-defence (4.2%) was the main contributor to growth in the quarter, due to increases in social benefits to households from continued government spending on disability, health and aged care services. State and local government expenditure increased 1.1% driven by rises in non-employee expenses.

SUSTAINED GROWTH IN INVESTMENT BY GENERAL GOVERNMENT

General government gross fixed capital formation increased 2.7% this quarter. The rise was driven by state and local general government (6.3%), with continued strength due to public infrastructure investment. This was offset by national general government, which fell 5.7% following defence purchases in the September quarter. Through the year general government gross fixed capital formation has risen 9.0%, again reflecting the high number of public infrastructure projects occurring across the country.

BUILD UP IN INVENTORIES

Inventories held by business increased $685m in the December quarter 2018.

GROWTH IN HOUSEHOLD CONSUMPTION SLOWS

Household final consumption expenditure increased 0.4% in the December quarter 2018, with through the year growth moderating to 2.0%. The growth in household consumption was driven by spending on health, clothing and footwear, and hotels, cafes and restaurants. There were falls in household spending for electricity, gas and other fuel, purchases of vehicles and furnishings and household equipment.

BROAD BASED GROWTH IN COMPENSATION OF EMPLOYEES

Compensation of Employee (COE) increased 0.9% in December quarter 2018 due to strength from both the private and public sector. Through the year COE increased 4.3% and with growth above its five year December average of 3.4% growth.

HOUSEHOLD SAVING RATIO INCREASED MARGINALLY

The household saving ratio rose to 2.5% in the December quarter 2018. This slight pick up was due to modest growth in household disposable income alongside lower growth in household spending. The growth in gross disposable income was due to continued growth in compensation of employees as well as an increase in insurance claims received by households.