Comments from EY chief economist Jo Masters
The economy expanded by 0.7 per cent in the June quarter, above expectations, pushing annual growth to 9.6 per cent through the year.
Encouragingly, economic activity was broadly based. While the economy was dragged lower by inventories and net exports, private domestic demand maintained healthy momentum across consumption, investment and dwelling construction and public investment ramped up to the highest levels on record. In addition, the terms of trade rose to its highest level in history, continuing to boost national income, and making a significant economic contribution to the mining sector and of course, the government coffers. On the production side, 17 out of 19 industries expanded in the quarter, led by administration and support services, transport postal and warehousing and accommodation and food services.
Even the significant detraction to growth from net exports has a silver lining. While service exports continued to be crimped by the closed international borders and the volume of iron ore being shipped slowed, the sharp jump in imports, which detracts from GDP data, is in reality a sign of a very healthy domestic economy drawing in imports of consumer, intermediate and capital goods.
It was also comforting to see households absorb a fall in disposable income (as income support unwound) and increase their spending on services by leaning on their savings. This is what we want, for households to drawdown on the war-chest of savings to smooth consumption. And, after 18 months of being home, Australian’s love of travel was clear in the June quarter, lifting transport services spending by 25 per cent.