Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Wednesday, 1 March 2017

Economy bounces back to grow by 2.4pc

GDP surges back

GDP jumped back strongly to rise by +1.1 per cent in the fourth quarter and +2.4 per cent over the calendar year. 

Net exports contributed +0.2 percentage points (ppts) to quarterly GDP growth, and household consumption a solid +0.5ppts. 

It looks as though dwelling construction won't be contributing much more to growth going forward, so government infrastructure investment may need to step up to the plate. 

Income surges

This was a much better result for nominal GDP which leapt by 3 per cent, with a scorching terms of trade index rising by 9.1 per cent thanks to a boom in coal and iron ore prices. 

As a result not only is real GDP at a record high, so too is real gross national income, real gross disposable income, and real net national disposable income. 

The weakest part of the release was very much to be seen at the household level, where wages have stagnated in real terms, while households are reducing their savings ratio in a bid to keep up with rising dwelling prices. 

At the state level there was a thumping quarterly result for Victoria, while Western Australia recorded growth in state final demand for the first time since June 2015, coming off the back of a horrible revised result for the preceding quarter (-4.3 per cent). 

The Australian Bureau of Statistics (ABS) noted strength in machinery and non-dwelling construction in Western Australia, which may indicate a corner in the process of being turned in the face of higher commodity prices. 

The wrap

Overall, this was a solid headline result which saw Australia stretch its unbroken run without a recession to 102 quarters. 

The Dutch hold the record at 103 quarters of continuous economic growth.

When you drill down to the household level the figures don't look half as clever, it must be said. 

Water, Drop, Liquid, Splash, Wet, Clean