Strong spending rates threat

Strong business investment and increased household spending have contributed to the fastest growth in Australia’s gross domestic product in more than three years.

Data released last week by the Australian Bureau of Statistics showed a growth in real GDP of 1.6 per cent in the March quarter, seasonally adjusted, the fastest quarterly growth since December 2003.

The rapid increase was largely driven by private business investment, which added 1.2 percentage points, although this measure was influenced by the official privatisation of Telstra last November, which changed its status from a public to private entity.

Household spending and growth in exports also contributed to the rise in GDP, which is now 3.8 per cent higher than a year ago, with household spending adding 0.9 percentage points, after rising 1.5 per cent in the quarter.

Housing investment was up by 1.5 per cent in the quarter and 9.5 per cent over the year.

In an industry breakdown, the construction sector and finance and insurance added a seasonally adjusted 0.2 percentage points to GDP growth, while manufacturing and utilities (electricity, gas and water supply) each detracted 0.1 percentage points from growth.

Following the announcement, the Australian dollar climbed to its highest level since August 1990, trading at around US84 cents at close.

The strong dollar, combined with the ABS data, prompted speculation from economists that the Reserve Bank of Australia would increase interest rates in August or November, although the bank left rates unchanged last week.

Meanwhile, Western Australia’s unemployment rate increased for the first time since October last year, rising from 2.7 per cent in April to 3.2 per cent in May, while the national rate fell to 4.2 per cent – a three-decade low.

Economists said the low national unemployment rate provided further support for an interest rate rise this year.

WA also demonstrated a slowdown in motor vehicle sales, with the growth rate halving in May to 7.4 per cent, from 15.9 per cent in April.

WA’s rate of growth was lower than that of the Australian Capital Territory (14.3 per cent), the Northern Territory (12.7 per cent) and Queensland (8.8 per cent).

On a year-to-date basis for 2007, WA’s growth rate (12.8 per cent) remains second only to the ACT (15.4 per cent).
Nissan leads the growth in year-to-date sales in WA, up 45.1 per cent for the year, followed by Mazda (18.6 per cent) and Toyota (18.5 per cent).

Kia and Hyundai were both down for the year, by 18 per cent and 20 per cent, respectively, while Holden and Ford up slightly (4.1 per cent and 2 per cent).

In another ABS release last week, the national birth rate was shown to have reached its highest level since 1971.

Preliminary data showed 265,922 births were recorded in Australia last year, the second highest figure on record.

Based on the 2006 Census, the national population grew by 1.4 per cent in the 12 months to December 31.

Overseas migration also provided a boost to population growth, with preliminary figures showing 147,700 people migrated to Australia in the year.