Mr BAIRD (2:24 PM) —My question is addressed to the Treasurer. Would the Treasurer outline to the House recent trends in investment and consumption. What is driving these results and what do they imply for Australia’s economic outlook?

Mr COSTELLO (Treasurer) —I thank the honourable member for Cook for his question. Last week’s national accounts figures showed that the Australian economy continued to strengthen in the June quarter, growing by 1.3 per cent to be 2.6 per cent higher through the year. When you consider the challenges we have had in the economy this year, that is particularly pleasing—challenges such as the trade weighted increase of the Australian dollar, which was eight per cent above its post-float average. There is also the challenge that world oil prices are now giving to the economy, with world oil prices, on average, now 45 per cent higher in 2004-05 than in 2003-04.

The other feature of the national accounts which was pleasing is that, although we are seeing a moderation in household demand and dwelling investment, they showed a very strong growth in business investment. Business investment is what will drive growth in the future and increase the capacity of the Australian economy. The business investment results could be shown with a pick-up of seven per cent from the June quarter, to be 15 per cent higher over the year; new building investment, 13 per cent higher over the year; new machinery and equipment, 18 per cent higher than a year ago; and new engineering and construction rose by 18 per cent over the year. In nominal terms, businesses invested around $110 billion in 2004-05. Of that $110 billion, $10 billion was in the mining industry. As you can imagine, in response to high prices, new investment in the mining industry has gone in for bulk commodities. We will be increasing capacity in both the iron ore and the coal industry to take advantage of an appreciation in Australia’s terms of trade and high mineral prices. So it is not just the growth in the national accounts; it is the quality of those national accounts, which shows that Australia is now investing and rebalancing growth, and that the export sector will be stronger in the years ahead.