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ANALYSIS AND COMMENTS
On the expenditure side, the growth (in seasonally adjusted volume terms) over the past four quarters was driven by Household final consumption expenditure (contributing 2.4 percentage points to GDP growth), Private Machinery and equipment investment (0.4 percentage points), Private Non-dwelling construction investment (0.4 percentage points), and Exports of goods and services (0.5 percentage points). Offsetting the growth during the past four quarters was a strong rise in Imports of goods and services (detracting 2.7 percentage points).
On the production side, the strongest contributing industries to GDP growth (in trend volume terms) over the past four quarters have been Finance and insurance (1.2 percentage points) and Property and business services (0.6 percentage points).
REAL GROSS DOMESTIC INCOME
The real purchasing power of income generated by domestic production can be 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 March quarter, real gross domestic income increased by 0.8% and the volume measure of GDP increased by 0.6%, reflecting an increase of 1.1% 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 grew 1.0% in trend terms in the March quarter. The seasonally adjusted terms of trade rose 1.1% in March following a 1.1% increase in the December quarter.
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 March quarter, trend Real net national disposable income increased by 0.9%, with growth over the past 4 quarters at 4.2% compared to 3.7% 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 the March quarter, in seasonally adjusted terms, Net exports detracted 0.7 percentage points from GDP compared to the 0.9 percentage points detraction in the previous quarter.
HOUSEHOLD SAVING RATIO
The Household saving ratio was 0.9 in trend terms and 0.5 in seasonally adjusted terms in the March quarter 2008.
Household saving is not directly measured. Rather 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).
PRICES IN THE NATIONAL ACCOUNTS
The National Accounts provides information on price movements within the various expenditure components of GDP. In March quarter 2008 growth in the Household final consumption expenditure (HFCE) chain price index in original terms was 1.2%, compared to 1.3% growth over the same period in the Consumer Price Index (CPI). 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 reweighted, 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.
The chain price index for Machinery and equipment fell 0.6% during the quarter and is now 3.8% lower than in March quarter 2007. The Non-dwelling construction chain price index increased 1.9% in March quarter and is now 5.4% higher than in March quarter 2007. The Domestic final demand chain price index, encompassing changes in both consumption and investment prices, increased by 1.1% in the quarter and 3.0% through the year.
Export prices rose 3.3% during the quarter and rose 2.5% through the year. Import prices rose 2.6% during March quarter and were up 2.1% 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 as such have a significant impact on household consumption, investment and saving decisions.
In the March quarter 2008, seasonally adjusted Compensation of employees grew by 1.6%, and the seasonally adjusted number of employees recorded in the Labour Force survey grew by 1.1%. Average compensation per employee increased by 0.5%.
Through the year growth in seasonally adjusted average compensation per employee was 4.3% compared to 4.1% growth over the same period in the total hourly rates of pay, excluding bonuses as published in Labour Price Index, Australia (cat. no. 6345.0). It should be noted that the conceptual bases for these two wage measures are different.
In trend terms, Hours worked increased by 0.5% during the March quarter with through the year growth at 2.8%. In the Market sector (see Glossary for definition) Hours worked increased by 0.3% during the March quarter with through the year growth at 2.5%.
In the March quarter 2008, GDP per hour worked (in trend terms) rose 0.2%. Market sector GDP per hour worked (in trend terms) rose 0.7% in the March quarter 2008 to be up 2.1% 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, employment and hours worked. The relationship between GDP, employment 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).
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 March quarter 2008, the trend Real ULC decreased by 1.6% while the trend Non-farm Real ULC decreased by 1.0%. 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 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.
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.
Build-ups in inventories have been shown in manufacturing for the past six quarters, retail trade for four quarters while wholesale trade inventories have been flat over the past three quarters
RELIABILITY OF CONTEMPORARY TREND ESTIMATES
Trend estimates are used throughout this publication as an alternative approach to the analysis of movements in time series data. Further 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 June quarter 2008. In the absence of any other revisions, seasonally adjusted growth of 0.8% is required in June quarter 2008 to maintain, in June quarter 2008, the trend growth of 0.7% currently estimated for the March quarter 2008.
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