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September quarter 1988 national accounts



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TREASURER

1*m£Zmi** COMMONWEALTH

parliam entary LIBRARY MICAH

NO.131

EMBARGO

STATEMENT BY THE TREASURER, THE HON P.J. KEATING MP

SEPTEMBER QUARTER 1988 NATIONAL ACCOUNTS

As usual, today's quarterly national accounts statistics must be interpreted with caution.

However, the statistics suggest that the Australian economy is growing solidly, with the mix of demand heavily concentrated on investment.

In other words, Australia is now putting in place the investment that will provide the foundation for sustainable growth for many years to come.

This surge in investment has been associated with a significant increase in import volumes, because most of the plant and equipment we need to modernise our industrial structure must come from overseas.

But the big difference between the present and Australia's past experience is that this time a recovery in our terms of trade is being applied to investing for our long term good.

This is demonstrated by the fact that as a proportion of GDP investment this financial year will be 12.3 per cent, the highest for 30 years, and well above the previous so-called 'resources boom' peak of 11.7 per cent in 1981-82.

Two key statistics in the national accounts also indicate that this time - unlike the early 1980s - the benefits of improved commodity prices are not been frittered away on short-term gains.

These are the very moderate private consumption figures of 0.6 per cent in the September quarter and only 1.6 per cent in the year to September, and the modest growth in average weekly earnings of 5.7 per cent in the year to the September

quarter.

In other words, the engine of growth remains very much worthwhile business investment.

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All arms of Government policy have been set to protect this pattern of growth; fiscal policy is tighter than at any time in the past 35 years, incomes growth continues to be restrained and monetary policy has been set to moderate demand pressures.

In more detail, today's national accounts show that overall economic growth in the September quarter (GDP) was 0.3 per cent, and in the year to the September quarter, 2.9 per cent. Both those figures are broadly consistent with

the Budget forecasts. Other highlights were

. a further significant contribution to growth from a build up in private non-farm stocks

. as expected, a significant detraction from growth in net exports

. a fall in the inflation rate, with the private consumption deflator rising by 1.7 per cent, compared with 1.9 per cent in June

. continued strong corporate profitability, which is underpinning strong investment growth

. as expected at Budget time, an increase in the terms of trade.

Today's two releases on private new capital expenditure shed further light on investment trends; firstly, in its June quarter survey the Bureau has revised up its earlier estimate of the real increase in equipment investment in 1987-88 from 3.5 per cent to 8.3 per cent.

Total investment in 1987-88 has also been revised up, and in national accounts terms has now risen by a real 13.7 per cent, compared with the original estimate of 9.9 per cent.

At the same time the Bureau's survey of investment intentions for 1988-89 confirms our budget forecast of around 12 per cent real increase, but now coming off an even higher base.

Finally, building approvals statistics, also issued today, are consistent with activity in the building sector returning to more sustainable long term levels.

CANBERRA 29 November 1988