5206.0 - Australian National Accounts: National Income, Expenditure and Product, Jun 2009 Quality Declaration 
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 02/09/2009   
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ANALYSIS AND COMMENTS


GROWTH RATES IN GDP

In seasonally adjusted terms, GDP increased by 0.6% in the June quarter. Through the year GDP growth was 0.6%, while non-farm GDP grew 0.5%.

Percentage changes, Volume measures
Graph: Percentage changes, Volume measures


On the expenditure side, the growth this quarter (in seasonally adjusted volume terms) was driven by Household final consumption expenditure (0.5 percentage points), Machinery and equipment investment (0.4 percentage points) and exports of goods and services (0.2 percentage points). Offsetting the growth was an increase in the imports of goods and services (detracting 0.5 percentage points).

On the production side, the strongest contributing industry to GDP growth (in seasonally adjusted volume terms) over the quarter was Property and business services (0.4 percentage points). The biggest detraction came from Agriculture, forestry and fishing (-0.4 percentage points).

Selected Industries Contribution to growth, Jun 08 to Jun 09: Trend
Graph: Selected Industries Contribution to growth, Jun 08 to Jun 09: Trend



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 by the Terms of trade. The graph below provides a comparison of quarterly movements in trend GDP (volume measure) and Real gross domestic income. In seasonally adjusted terms, during the June quarter, real gross domestic income decreased by 1.1% while the volume measure of GDP increased by 0.6%, reflecting a decrease of 7.4% in the Terms of trade. Real gross domestic income has fallen by 3.8% since the September 2008 quarter.

Percentage changes: Trend
Graph: Percentage changes: Trend



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 fell 7.4% in seasonally adjusted terms in the June quarter following a 7.7% decrease in the March quarter.

Terms of trade, Trend - (2006-07 = 100)
Graph: Terms of trade, Trend—(2006–07 = 100)



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 2.2%, with change over the past 4 quarters at -3.2% compared to 0.3% for GDP.

Percentage changes: Trend
Graph: Percentage changes: Trend



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 the June quarter, in seasonally adjusted terms, Net exports contributed -0.3 percentage points to GDP compared to the 2.2 percentage points in the previous quarter.

Net Exports Contribution to growth, Volume measures
Graph: Net Exports Contribution to growth, Volume measures



HOUSEHOLD SAVING RATIO

The Household saving ratio was -0.4 in trend terms and 4.0 in seasonally adjusted terms in the June quarter 2009. The trend estimate over the past three quarters is heavily influenced by trend breaks inserted in the series to account for government stimulus payments to households.

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 please refer to Spotlight on National Accounts - Household Saving Ratio (cat. no. 5202.0).

Household saving ratio, Current prices
Graph: Household saving ratio, Current prices



Prices in the National Accounts

The GDP chain price index was -2.2% in June quarter 2009.

The chain price index for Household final consumption expenditure (HFCE) was 0.3%, compared to an increase of 0.5% in 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 the frequency with which each index is re-weighted the range of lower level indexes contributing to each index and the concepts and treatment of household expenditure, particularly in respect of home ownership costs.

Prices of private gross fixed capital formation decreased by 0.4% in this quarter but has increased by 2.1% in the year since June quarter 2008. The decrease in June quarter 2009 has been driven by a fall in Non-dwelling construction prices and offset by a rise in Machinery and equipment prices. The Non-dwelling construction chain price index decreased 2.2% in June quarter and is now 2.4% lower than in June quarter 2008. The chain price index for Machinery and equipment rose 0.1% during the quarter and is now 9.0% higher than in June quarter 2008.

The Domestic final demand chain price index, encompassing changes in both consumption and investment prices, increased by 0.1% in the quarter and 2.7% through the year.

Export prices decreased by 16.3% during the quarter and have decreased 8.0% through the year. Import prices decreased by 8.1% during June quarter and were up 4.4% through the year.

Selected Expenditure chain price indexes, Percentage changes: Original
Graph: Selected Expenditure chain price indexes, Percentage changes: Original



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 2009, seasonally adjusted Compensation of employees fell by 0.3%, and the seasonally adjusted number of employees recorded in the Labour Force survey was flat. Average compensation per employee decreased by 0.3%.

In trend terms, Hours worked decreased 0.9% during the June quarter with through the year change a decrease of 2.1%. In the Market sector (see Glossary for definition) Hours worked fell during the June quarter (-0.9%) with through the year change at -2.8%. In the June quarter 2009, GDP per hour worked (in trend terms) grew 1.1%. Market sector GDP per hour worked (in trend terms) grew 0.1% in the June quarter 2009 and 0.8% 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 relationship between GDP and hours worked is complex and has attracted a great deal of interest. The ABS has produced a number of pieces of analysis which investigate the relationship in detail. For more information please refer to Leading Indicators of Employment (Feature Article) 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).

Percentage changes: Trend
Graph: Percentage changes: Trend


Unit labour costs (ULC) represent a link between productivity and the cost of labour in producing output. A 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 a real ULC indicates that labour cost pressures exist. In the June quarter 2009, the trend Real ULC increased by 0.6% while the trend Non-farm Real ULC increased by 0.4%. The Non-farm measure is generally preferred as it removes some of the fluctuations associated with Agriculture.

Real unit labour costs: Trend - (2006-07 = 100.0)
Graph: Real unit labour costs: Trend—(2006–07 = 100.0)



CHANGES IN INVENTORIES

Changes in inventories can have a significant impact on growth in GDP in any particular quarter. 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 Change in inventories contribution to GDP growth, both in trend terms. Even in trend terms the Change in inventories contribution to GDP growth is quite volatile.

Inventories and GDP: Trend
Graph: Inventories and GDP: Trend


Change in inventories can be disaggregated into a number of industries. The graph below shows the three largest inventory holding industries, Manufacturing, Wholesale and Retail trade.

Change in inventories, Selected industries: Trend
Graph: Change in inventories, Selected industries: Trend


In trend terms the June quarter saw a run down in inventories for all three divisions.


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 2009. In the absence of any other revisions, seasonally adjusted growth of 0.0% is required in September quarter 2009 to maintain, in June quarter 2009, the trend growth of 0.3% currently estimated for the June quarter 2009.

Percentage Change in GDP Chain Volume Measure

Trend estimates if seasonally adjusted GDP changes by the following amounts in Sep Qtr 2009
Seasonally adjusted GDP as published in table 2
Trend GDP as published in table 1
Grows by 1.0%
No change
Falls by 1.0%

2007
March
1.5
1.1
1.1
1.1
1.1
June
0.8
1.1
1.1
1.1
1.1
September
0.9
0.9
0.9
0.9
0.9
December
1.0
0.8
0.8
0.8
0.8
2008
March
0.7
0.8
0.8
0.8
0.8
June
0.3
0.4
0.4
0.4
0.4
September
0.3
-
-
-
-
December
-0.7
-0.1
-0.1
-0.1
-
2009
March
0.4
0.1
0.2
0.1
0.1
June
0.6
0.3
0.6
0.3
-

- nil or rounded to zero (including null cells)