Scott Kompo-Harms, Economics Section
Economic growth
The latest economic growth figures were released by the
Australian Bureau of Statistics (ABS) on 1 September 2010. In trend
terms, real gross domestic product (real GDP) increased by
0.9 per cent through the June quarter to be
3.2 per cent higher throughout the year to the end of
June. The various components of real GDP can either add to or
subtract from growth. Looking at the most significant positive
contributors to growth, out of the 0.9 percentage points of real
GDP growth in the quarter, household final consumption expenditure
contributed 0.5 percentage points, exports of goods and
services contributed 0.4 percentage points and public gross
fixed capital formation (public investment) contributed
0.3 percentage points. The largest detractors from growth were
imports of goods and services, which subtracted 0.4 percentage
points, while changes in inventories subtracted 0.1 percentage
points. Real GDP per capita (or income per head of population, a
measure of living standards) rose by 0.5 per cent in the
June quarter and was 1.5 per cent higher throughout the
year.
Labour productivity (real GDP per hour worked) rose by
0.2 per cent to stand 1.2 per cent higher over
the year. This rather sluggish growth in labour productivity is at
least partially attributable to a strong rise in hours worked which
is the natural consequence of recovery from an economic
slowdown.
In terms of the composition of national output, the strongest
performing industries were construction (which grew by
2.6 per cent); professional, scientific and technical
services (2.0 per cent); information media and
telecommunications (1.5 per cent) and manufacturing
(1.4 per cent). Agriculture, forestry and fishing output
fell by 2.2 per cent in real terms, arts and recreation
services and other services fell by 0.8 per cent each,
and accommodation and food services fell by
0.7 per cent.
Prices, wages and interest rates
The Consumer Price Index (CPI) increased by
0.6 per cent in the June quarter 2010 to be
3.1 per cent higher throughout the year. The prices of
‘tradeables’ (goods that are traded internationally)
rose by 1.0 per cent in the quarter to be
1.4 per cent higher through the year to June.
Nontradeables rose by 0.3 per cent in the June quarter to
be 4.2 per cent higher through the year. The measures
used by the Reserve Bank of Australia (RBA) to gauge what is known
as ‘underlying’ inflation include the ‘weighted
median’ and the ‘trimmed mean’. These measures
are designed to strip out some of the short-term
‘noise’ in the figures. They both rose by
0.5 per cent to be 2.7 per cent higher
throughout the year, which sits within the RBA’s inflation
target of between 2 and 3 per cent per annum.
In addition to the CPI, the ABS also releases cost of living
indexes for a number of different ‘household types’.
Specifically, indexes are produced for employees, age pensioners,
other government transfer recipients and self-funded retirees. In
the June quarter 2010, other government transfer recipients’
cost of living increased by 1.4 per cent, while for
employees, it increased by 1.3 per cent. The cost of
living for self-funded retirees and age pensioners increased by
0.5 per cent.
In trend terms, private sector earnings (as measured by the
Labour Price Index, or LPI) increased by 0.7 per cent in
the June quarter 2010, to be 2.7 per cent higher than a
year earlier. Public sector earnings rose by 1.0 per cent
in the quarter and 4.0 per cent over the year. Overall,
the LPI increased by 0.8 per cent in the quarter and 3.0 per cent
over the year.
The current interest rate cycle began with a rapid loosening of
monetary policy. The RBA’s cash rate target was slashed
between September 2008 and April 2009, from a peak of
7.25 per cent (which prevailed between March and August
2008), to a low of 3.00 per cent by April 2009. This was
maintained until October 2009, when the RBA commenced tightening
monetary policy to more ‘normal’ levels. In a series of
six gradual moves between October 2009 and May 2010, the cash rate
target was increased to 4.5 per cent, where it remains
today.
The labour market
In July 2010, the (trend) unemployment rate stood at
5.2 per cent (5.1 per cent for males and
5.3 per cent for females), down from
5.8 per cent in July 2009 (6.1 per cent for
males and 5.5 per cent for females). Full-time employment
rose by 2.4 per cent in the year to July 2010 to stand at
7.88 million, while part-time employment grew by
3.3 per cent over the same period to stand at
3.34 million. Total unemployment fell by
7.9 per cent in July to around 619 000 persons,
while the labour force (both the employed and the unemployed) grew
by 2.1 per cent throughout the year to July 2010.
Labour demand, as measured by the ABS Job Vacancies
series, has softened since May 2008. Private sector vacancies have
fallen at an average annual rate of 4.8 per cent in the
two years to May 2010, while public sector vacancies have fallen at
an average annual rate of 11.6 per cent over the same
period. Overall, vacancies fell at an average rate of
5.5 per cent between May 2008 and May 2010.
Library publications and key documents
Australian Bureau of Statistics, Australian
National accounts: National income, expenditure and product,
June quarter 2010, cat. no. 5206.0, ABS, Canberra, 1 September
2010,
http://www.ausstats.abs.gov.au/ausstats/meisubs.nsf/0/2D6DD2723BAA55F8CA257790001DB269/$File/52060_jun%202010.pdf
Australian Bureau of Statistics, Consumer
Price Index, June quarter 2010, cat. no. 6401.0, ABS,
Canberra,
http://www.ausstats.abs.gov.au/ausstats/meisubs.nsf/0/DB27E14A103FB951CA25776D001B5ADF/$File/64010_jun%202010.pdf
Reserve Bank of Australia, Statement on
Monetary Policy, RBA, Sydney, August 2010, http://www.rba.gov.au/publications/smp/2010/aug/pdf/0810.pdf