ECONOMIC GROWTH – DECEMBER 2009 QUARTER
Published 25 March 2010
The economic recovery gains momentum…
Economic activity increased by 0.8% in the December 2009 quarter, following growth of 0.3% in the September 2009 quarter (Figure 1). The rise was in line with expectations and sets the scene for relatively strong growth over 2010. The December 2009 quarter was also the first time since June 2008 that annual growth was positive (up 0.4%) (Figure 2). With the recovery underway and signs of increased business investment over the December 2009 quarter, a return to employment growth is expected in coming quarters. Any initial rise in labour demand however, is likely to be met from increasing the hours of current staff rather than increased hiring.
Figure 1: Quarterly Economic Growth
Figure 2: Annual Average Economic Growth
…with manufacturing activity rebounding strongly…
Activity in manufacturing grew strongly over the December 2009 quarter, up 4.5%, as domestic demand recovered, Australia grew strongly, and firms began to rebuild their inventories. Many manufacturers would have also benefited from the favourable exchange rate with Australia. The rise in manufacturing followed seven quarters of decline where output fell by a total of 15% as demand was severely dented by the global downturn. Activity also rebounded strongly in wholesale trade (up 2.7%) benefiting from the recovery in retail and manufacturing.
…and consumer spending continuing to rise…
Household consumption expenditure rose by 0.9% over the quarter on the back of strong consumer confidence. The rise follows a large increase in the September 2009 quarter. Improved consumer spending helped activity in retail, accommodation & restaurants rise by 1.7%, its largest increase since March 2007.
…but there are some areas of weakness
Activity in primary industries fell by 1.3% after strong growth in the September 2009 quarter, while personal, health & community services also declined. Total construction activity fell by 0.6% over the quarter, with a decline in non-residential construction partially offset by residential investment increasing by 4.8%.
Growth expected to be robust over 2010
The December 2009 quarter result suggests that the economic recovery has become more broad-based. With consumer and business confidence remaining high, and the outlook in Australia and Asia continuing to improve, solid growth is expected over 2010. However, it should be remembered that this growth follows a recession where the economy contracted by 3.4% and economic activity is not expected to return to its December 2007 peak until late 2010. Furthermore, considerable uncertainty around both the domestic and global outlook remains, in particular, as many countries wind down their fiscal and monetary stimulus.