Population growth can't fuel the economy forever

By Callam Pickering

However, high population growth remains the dominant feature of Australia’s economy, with real GDP per capita rising by just 0. 1 per cent in the June quarter.

Household consumption rose by 0. 5 per cent in the June quarter — a bit of an upside surprise given the decline in retail trade volumes — to be 2. 2 per cent higher over the year.

Business investment rose by 1. 0 per cent in the June quarter, which reflected a solid contribution from non-residential construction.

Real national disposable income per capita fell by 0. 6 per cent in the June quarter, highlighting the pressure on household and business balance sheets.

Residential investment rose by 2. 3 per cent, following strong growth last quarter, to be 8. 6 per cent higher over the year.

Real gross domestic product rose by 0. 5 per cent in the June quarter, beating market expectations, to be 3. 1 per cent higher over the year.

The outlook for business investment remains soft, with nominal capital expenditure set to decline by almost 10 per cent in the 2014-15 financial year (A weakening investment outlook for businesses, August 28).

Government spending fell for the second straight quarter, which reflected a sharp decline in non-government public sector investment.

Net exports volumes, which are unaffected by shifts in prices, subtracted 0. 8 percentage points from real GDP growth, consistent with the data out yesterday (An apartment construction boom chaser, September 2).

Growth in the Australian economy softened during the June quarter and more timely indicators of activity suggest that below-trend should continue during the September quarter.

But housing construction is relatively small at only 3. 2 per cent of real GDP; the household sector, exports and non-mining investment will need to do the heavy lifting.

Finally, real GDP was saved by greater inventory accumulation, which contributed 0. 9 percentage points to growth in the June quarter.

Read more here: Business Spectator


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