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ANALYSIS AND COMMENTS
On the expenditure side, the increase this quarter (in seasonally adjusted volume terms) was driven by Final consumption expenditure (0.7 percentage points) and Public gross fixed capital formation (0.2 percentage points). These increases were partially offset by Net exports (-0.6 percentage points) and Changes in inventories (-0.2 percentage points).
From the June quarter 2014 to June quarter 2015, Financial and insurance services (0.6 percentage points), Information media and telecommunications (0.3 percentage points) and Health care and social assistance (0.3 percentage points) industries were the largest contributors to total trend growth of 2.2%. Construction (-0.2 percentage points) and Professional, scientific and technical services (-0.1 percentage points) were the largest detractors in trend terms.
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 trend terms, during the June quarter, Real gross domestic income was flat, while the volume measure of GDP increased by 0.5%, the difference reflecting a decrease of 2.5% 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 decreased 3.4% in seasonally adjusted terms in the June quarter following a decrease of 2.9% in the March quarter. From the June quarter 2014 to the June quarter 2015 the Terms of trade has fallen 10.6%.
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 June quarter, trend Real net national disposable income decreased by 0.3%. The past four quarters fell 0.7% compared with 2.2% growth 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 June quarter 2015. Net exports added 0.2 percentage points in the March quarter 2015. In the June quarter 2015, Exports of goods and services fell 3.3% and Imports of goods and services fell 0.7%.
HOUSEHOLD SAVING RATIO
The Household saving ratio was 8.8% in seasonally adjusted terms in the June quarter 2015. The trend estimate for the Household saving ratio was 8.6% in the June quarter 2015.
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 fell 0.5% in the June quarter.
The Chain price index for Household final consumption expenditure (HFCE) increased 0.3% in the June quarter 2015, compared with 0.7% for 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:
For the June quarter purchases of New dwellings was a significant contributor to the CPI.
The Chain price index for Private gross fixed capital formation increased 0.7% in the June quarter. This increase was mainly driven by an increase in the Chain price index for Total dwellings (1.0%) and Machinery and equipment (1.7%).
The Domestic final demand Chain price index, encompassing changes in both consumption and investment prices, increased 0.7% this quarter and 1.9% through the year.
The Export Chain price index decreased 3.5% during the quarter and fell 7.1% through the year. The Import Chain price index increased 1.3% in the June quarter and increased 3.3% 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 June quarter 2015, seasonally adjusted Compensation of employees increased 0.9%, and the seasonally adjusted number of employees recorded in the Labour Force survey grew 0.7%. Average compensation per employee increased 0.2%.
In trend terms, Hours worked rose 0.7% over the quarter and increased 2.0% through the year. In the Market sector (see Glossary for definition), Hours worked rose 0.3% over the quarter and 1.7% through the year. In the June quarter 2015, GDP per hour worked (in trend terms) fell 0.2% but rose 0.1% through the year. Market sector Gross value added (GVA) per hour worked (in trend terms) rose 0.4% in the quarter and 0.7% 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. 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 real ULC indicates that labour cost pressures exist. In the June quarter 2015, trend Real ULC increased 0.3% and the trend Non-farm Real ULC increased 0.6%. 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 change 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 four largest inventory holding industries, Mining, Manufacturing, Wholesale trade and Retail trade. In seasonally adjusted terms, Mining, Wholesale trade and Retail trade were run down in the June quarter 2015, while Manufacturing experienced a build-up.
The National income account shows how Gross disposable income is used for Final consumption expenditure and the Consumption of fixed capital (depreciation), with the balance being the nation's net saving. In the June quarter 2015, National net saving relative to Net national disposable income was 6.7% in trend terms.
The sectoral income accounts are disaggregations of the National income account, and record for each institutional sector its net income arising from production, property income and transfers from other sectors, and its uses of income. The difference between income and use of income is net saving. In the June quarter 2015, net saving for Non-financial corporations was -$0.5b in trend terms. Financial corporations net saving was $6.5b. General government was -$6.0b while Household net saving was $20.5b.
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 September quarter 2015. In the absence of any other revisions, seasonally adjusted growth of 0.5% is required in the June quarter 2015 to maintain, in the September quarter 2015, the trend growth of 0.5% currently estimated for the June quarter 2015.
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