Gross domestic product


Monthly Statistical Bulletin Feature Articles

Feature Article Gross domestic product

Gross domestic product (GDP) of Australia is the total market value of all goods and services produced within Australia in a given period of time.

GDP does not allow for the depreciation of plant and equipment which is why the measure is called gross domestic product. Also, GDP does not differentiate between who produces the goods and services, i.e. residents or non-residents, this is left to the gross national income (GNI) measure formely called gross national product (GNP) which attributes production to residents irrespective of where the production occurs.

GDP is reported in two ways in current prices, and in real terms using what are called chain volume measures . In essence, chain volume measures are constant price estimates. This means that they measure production volumes by removing that part inflated by price increases. Chain volume measures are described in greater detail in the Monthly Economic and Social Indicators (MESI) feature article entitled Chain volume measures .

Economic growth

Although the current dollar value of GDP is quoted by commentators to show the size of the economy it is now running at $893 billion it is the annual and quarterly changes in real or chain volume measure GDP that is most often quoted.

The percentage change in real GDP, whether on a quarterly or annual basis, is called economic growth . Economic growth is generally considered to be good when it is positive, i.e. the economy is growing, and bad when it is negative, i.e. the economy is contracting. Also, to allow for the fact that average living standard per head of population can only be rising if economic growth exceeds population growth, economists and commentators generally want to see economic growth exceed about 2 per cent per annum.

Recession

A contracting economy is defined to be in recession if it contracts for two or more consecutive quarters.

As Figure 1 shows, there have been four recessions since 1960 in 1961, 1974 75, 1982 83, and 1990 91.

Non-farm gross domestic product

Non-farm GDP is simply GDP with that portion of GDP attributable to agriculture and services to agriculture excluded. This measure thus removes the effect of the sometimes large changes in agricultural output and activity which can occur because of fluctuations in rural conditions.

To demonstrate these fluctuations, Figure 2 plots chain volume measure seasonally adjusted farm GDP since the September quarter 1985. It shows clearly the large decline in farm GDP at the time of the 1994 95 and 2002 03 droughts and the current decline largely for the same reason.

Although agriculture contributes only about 3 per cent of GDP, these large effects can tend to obscure underlying changes in GDP in the rest of the economy. This makes non-farm GDP useful to some economists, analysts and commentators.

MESI tables 3.1 and 3.2

MESI table 3.1 shows for the past five years:

  • quarterly seasonally adjusted, and annual original, current price GDP
  • quarterly seasonally adjusted, and annual original, chain volume measure GDP and
  • quarterly and annual percentage changes.

The annual percentage change in quarterly seasonally adjusted chain volume measure GDP is graphed over the past twenty quarters (five years).

MESI table 3.2 shows the same statistics as table 3.1 but with GDP replaced by non-farm GDP.

MESI e-data tables 3.1 and 3.2

MESI e-data tables show the same statistics as MESI tables 3.1 and 3.2 but running from the September quarter 1959.

Graphs for tables 3.1 and 3.2 also begin with the September quarter 1959.

This feature was prepared by Greg Baker and Stephen Barber

Back to top


Facebook LinkedIn Twitter Add | Email Print