The June Quarter National Accounts figures show that the economy grew by 0.5% and 3.1% over the full years.
The Treasurer, Joe Hockey, says the first half of 2014 has seen economic growth stronger than expected. He said there have improvements in consumer and business confidence, and business conditions are at a four-year high.
Statement released by Treasurer Joe Hockey.
National Accounts – June Quarter 2014
The National Accounts released today show that the Australian economy continued to grow in the June quarter, expanding by 0.5 per cent and 3.1 per cent over the year.
In light of the previous quarter, when the economy grew by 1.1 per cent, it was a strong outcome. It shows that the first half of 2014 was stronger than expected.
This is consistent with overall improvements in consumer confidence, business confidence and business expectations. Business conditions are at a four-year high and, on average, jobs this year have been created at three times the level we saw in 2013.
There is more to do – with a growth still below trend and the unemployment rate rising.
Imports of goods and services rose 3.7 per cent in the June quarter and exports of goods and services fell 0.8 per cent in the June quarter.
Taken together, net exports (exports less imports) subtracted 0.9 percentage points from growth in the June quarter, after contributing 1.2 percentage points in the March quarter.
Household consumption grew by 0.5 per cent in the quarter despite an unusually warm start to winter reducing both clothing sales and electricity demand.
Dwelling investment continued to grow, following strong building approvals, as the sector responds to the low interest rate environment. Dwelling investment rose by 2.3 per cent in the June quarter and it was skewed toward building new dwellings rather than alterations and additions.
A turnaround in inventory accumulation, particularly in manufacturing and mining, contributed 0.9 per cent to GDP growth in the June quarter.
New private business investment fell by 0.3 per cent in the quarter and was 4.4 per cent lower than a year ago. The fall in business investment is expected to continue in the near term as resource construction projects were completed and as non-resources business investment slowly gathers pace.
New public final demand remained subdued, growing by 0.4 per cent in the quarter and 1.2 per cent through the year.
Nominal GDP – the dollar value of goods and services produced in the economy – was flat in the quarter and rose by a relatively subdued 3.3 per cent through the year. The weakness was largely due to a 4.1 per cent fall in Australia’s terms of trade. Falling non-rural commodity prices dragged down the terms of trade and generated a 6.4 per cent decline in export prices in the quarter.
Compensation of employees – the total wage bill in the economy – grew by 0.8 per cent in the quarter. The weak growth in compensation reflects labour market conditions, with both employment and wages growing more slowly than usual.
Corporate profits fell by 3.0 per cent in the quarter, mainly due to the impact of commodity declines on the mining sector.
Overall, the outcome is stronger than was expected but growth remains below the long-term trend. This highlights the importance of continuing to do everything we can to drive momentum in the economy.
Transcript of Treasurer Joe Hockey’s press conference on the National Accounts figures.
HOCKEY: Thank you for coming. We’re here to talk about the June quarter national accounts. They are a pleasing set of numbers and certainly the June quarter national accounts indicate that there is real and building momentum in the Australian economy. The Australian economy, obviously, expanded by 0.5 per cent in the June quarter; 3.1 per cent over the course of the year. In light of the previous very strong quarter, where we grew by 1.1%, this was a strong outcome and it was at the top of market expectations. It also shows that the first half of this year was stronger than expected. It is a bit better than was expected in the Budget and it’s consistent with forecasts from the Reserve Bank. This is consistent with the overall improvements in consumer confidence, business confidence, and business expectations with conditions at a four-year high.
This year alone, new jobs are being created at three times the speed at the same average as last year. Job advertisements are also encouraging, they’re a good lead indicator, and I want to emphasise that there’s still more to do. We have growth still below trend and the unemployment rate is still too high. Resources actually made up one third of growth in the previous year, but that’s changing in nature from mining construction and investment to mining production and it’s a good thing to see that the household sector held up in the last quarter, despite a late start to winter which had an obvious impact on clothing and obviously electricity and heating usage. So, what we’re seeing is momentum building in the non-mining side of the economy and this is a welcome trend, but we have to do more to drive the economy and everything we are doing is focussed on delivering our Economic Action Strategy. We got rid of the Carbon Tax, got rid of the Mining Tax, we have signed up new Free Trade Agreements with Korea and Japan and we hope to sign one with China before the end of the year. We’re getting the Budget back under control and importantly delivering the structural savings that are going to help to address the deficit and debt problem. We’ve got the biggest infrastructure program in modern Australian history, which is going to roll out at speed, certainly from the middle of next year which will help to address some of the demand shortfall that is associated with the changing nature in the Australian economy. Overall, as I said, these are pleasing figures but we are not complacent; the unemployment rate is still too high, we’ve got to get economic growth above trend in order to start to bring the unemployment rate down. That’s hugely important. So, whilst there are many green shoots here, the fact is that there are still challenges that need to be met and that’s exactly what the Coalition is doing. Questions?
HOCKEY: Well, the interesting thing is one of the tables I’ve given you towards the back, indicates that iron ore prices are well below what we expected in the Budget and coal prices are well below what we expected in the Budget and that will have an impact at this stage on our Budget bottom line – negative impact.
JOURNALIST: Are you worried about revenues in the longer term?
HOCKEY: There are many challenges in relation to revenues. The integrity of the tax system obviously is part of it, and you know, we’re facing some very significant pressures. Company tax rate for example in the United Kingdom is at around 21 per cent, in Asia it’s around 15 per cent to 16 per cent in various places. Here we’re 30 per cent, and personal income tax levels are significantly less in many other jurisdictions. So, we are facing some competitive pressures in relation to tax.
JOURNALIST: Just to follow up the issue that’s gone on in the US where Burger King is trying to (inaudible) effectively move into Canada…
HOCKEY: I wasn’t familiar with that takeover, I must say! I’ve given up on hamburgers these days.
JOURNALIST: But that issue of companies moving – being footloose – moving to other jurisdictions is that something that you’re seeing in Australia because of the 30 per cent rate and does that mean there’s an imperative to try and take down the rates?
HOCKEY: There are some big structural challenges and that’s one of the reasons why we are having a Taxation White Paper next year. I’ll also have more to say about tax in the next few days and there is quite a bit of work we’ve been doing with the G20 and also quite a bit of work that the Commissioner of Taxation of Australia has been doing with other equivalent Commissioners in other jurisdictions. One thing’s for sure – we are doing everything we can to make sure that those people who earn income in Australia pay tax in Australia.
JOURNALIST: Mr Hockey, you’ve no doubt seen the reaction of the superannuation industry to the Mining Tax deal. Can you just respond to that and also can you explain why it’s better in the Government’s eyes for people to have the cash in their pocket now rather than provide for their own retirement through superannuation?
HOCKEY: Well, there was a well written article this morning in one of the newspapers by Peter Martin, and I thought he summarised it quite neatly. The fact is, if you apply the Bill Shorten test, every dollar that goes into super would otherwise go into a person’s pocket. So, the bottom line is in the short to medium term, people are going to have more money in their pockets and their super will continue to rise but the best thing we can do for superannuation is to grow the economy because that actually grows the size of superannuation in Australia. I’ve seen some of the figures bandied around by the superannuation industry; I’d love to see some of the assumptions behind it including the fees they’re deducting from some of those assumptions and there’s no reason why you couldn’t apply the same assumptions, maybe more generous assumptions to the ability of individuals to spend their own money and get a better return than they might have got out of their super. It’s up for debate but we still believe superannuation is an important part of the savings equation in Australia, that’s why we remained absolutely committed to superannuation; ensuring it’s sustainable and growing. It’s just at the moment we need to make sure that we get the savings in the Budget that help to address the longer term challenge of the nation.
JOURNALIST: (Inaudible) It might be better if that logic was applied, not to even move from 9.5 per cent to 12 per cent at any point, there are some people who are nervous about it, given the changes yesterday. Do you guarantee that it’s going to get to 12 per cent by 2025, you won’t amend it again?
HOCKEY: We just legislated it, we just legislated it. Can I make this point which is I would have thought pretty obvious – if Mr Shorten is so concerned about superannuation for workers why is he opposing the Government paying superannuation for people taking maternity leave and paternity leave until the PPL scheme? I mean, that’s a point isn’t it? Because he says this is absolutely vital for individuals – ask him the question – why does he say it is an unfair PPL scheme for us to pay the superannuation of mums on maternity leave?
JOURNALIST: Well, that doesn’t go to David’s question though; can you guarantee you won’t fiddle again?
HOCKEY: We’ve just legislated. You can ask me a 100 guarantees about everything. I’m not going down the guarantee path, other than to say we just legislated it, we don’t intend to revisit the Mining Tax legislation and the associated expenditure; we do not intend. It is hugely important but if people have a problem with the decisions that were made in relation to the Mining Tax, blame Bill Shorten, blame Bill Shorten, because Bill Shorten was the one that refused to negotiate even though we took the package to two elections.
JOURNALIST: In your capacity as acting Minister for Small Business, the small business sector is running around this morning quite worried because there’s a lack of detail about the abolition of (inaudible) carry back and the other parts of the Mining Tax; can you give them a date when these things will be cut off and can you ensure small businesses who have entered into arrangements under the now formal order, that they won’t be disadvantaged?
HOCKEY: Yeah, I’ll make an announcement in relation to that specifically prior to the legislation receiving Royal Assent. I’m consulting with the Tax Office about the timing and I want to make sure that we don’t create any disruptive behaviour in relation to this matter. Now, the fact is it was meant to start on 1 January 2014. That has been the case throughout the year. Obviously, at the end of last year, Labor voted against our Mining Tax package, so that meant that the 1st of January 2014 wasn’t going to happen. Then we’ve gone through all the events of the last few months which I choose not to revisit, in relation to the Mining Tax. Now that it has passed, I want to consult with the small business sector and consult with the Tax Office and other appropriate stakeholders and make sure we get the timing right.
JOURNALIST: So, your intent is that no one is disadvantaged?
HOCKEY: (Inaudible) Certainly from the first – The Prime Minister and I instinctively do not like any retrospectivity in these issues. So, we’re mindful of that.
JOURNALIST: Back to the national accounts: with incomes falling and nominal GDP at zero, are we in danger of entering a period of growth without prosperity?
HOCKEY: No, no. There’s actually quite a good chart, one of the charts – I don’t accept – I don’t know where you’re getting nominal GDP growth at zero, it was pretty flat.
HOCKEY: Oh, in the last quarter? There have been some – through the year, it was around 3.3 per cent.
JOURNALIST: That’s still very, very low.
HOCKEY: Well, it was just a bit below what we expected off the – out of the Budget. In fact you know, it’s come off a bit in the last quarter but I still believe that the dollar value of goods and services produced will continue to improve. I’m not giving up on it at all, at all. You know, the fact of the matter is – I mean, we are facing some challenges, individual challenges, but all of them are beatable if we just continue to create momentum in the economy. I have no doubt about that.
JOURNALIST: (Inaudible) negotiating on the Budget – have you thought about picking up the phone to Bill Shorten or picking up the phone to Christine Milne and perhaps approaching them again?
HOCKEY: In the case of Christine Milne she refused to return a number of our phone calls. Now, eventually Mathias Cormann’s phone call was accepted and they met and, as I understand, it wasn’t a particularly fruitful meeting, or pleasant in some cases. You know, the starting point is all we asked the Labor Party and the Greens to do is to keep to their promises. The Greens believed that it is appropriate that you have fuel indexation; well, you’d think that the Greens would stick to that and then you would think that the Labor Party would stick to their promises at the last election in relation to savings. As a starting point, all we want them to do is to keep to what they promised at the last election. Now, we’re happy to discuss – the door is always open – I reach out to everyone and I am prepared to speak with everyone. I speak to various people and have had some individual discussions with people in the Labor Party on some individual matters. I don’t understand what their logic is – as I’ve said – they’ve got their foot on the accelerator and they are going into a cul-de-sac at high speed.
JOURNALIST: Mr Hockey, they might say that you haven’t kept to your promise to freeze the super guarantee to 9.5 per cent for two years; it is now six or seven. How do you respond to the analysis that by doing that you are necessarily reducing the superannuation entitlements of lots of workers and that will mean that many more will apply – at least –for part-pensions and become an impost on the state and that runs counter to your narrative of ending the age of entitlement?
HOCKEY: That assumes that there is no growth in the pool of superannuation, or limited growth and the best way to grow the pool of superannuation is to have a stronger performing economy, stronger performing equity markets, more profitable businesses, higher real estate prices; these things all feed into the value of superannuation in the return on investment. All those things do. And the best way to have a strong economy is to ensure that you have a government living within its means, that you have good job growth, that you have sound investment, that you don’t waste money, that you build infrastructure that lifts the productivity rate in the economy. If you do all of those things, then the pool of superannuation in Australia will continue to grow. So, there is just a number of heroic assumptions that are the base for some of the claims being made but the most significant statement on this came from Bill Shorten, when he said, ‘increases in contributions in superannuation come out of the wages of workers’. Well, we’re the workers friends, we’re on their side, we want them to have more money in their pockets over the next few years, particularly when you haven’t got particularly strong wage growth and why? Because we still have unemployment that is too high. So, you know if we can get unemployment down, then you’ll get better wage growth and then there’s obviously – hopefully it will kick in at exactly the right time.
JOURNALIST: On that point: the heroic assumptions, one of the numbers is that if you’re 40 and you’re earning about $70,000, your nest egg will be $19,000 smaller as a result of yesterday’s changes. Do you dispute that number or think that it’s…
HOCKEY: Well, it’s based on the fundamental assumption that people make: A, they don’t receive any income at all in compensation for what goes into superannuation, and B, that they don’t make any money out of the income that they receive when they go into – when they receive the money. So, it’s just, you know, the suggestion that people are losing – I think the number was $128 billion – was that the number I heard? $128 billion, I completely reject, because they’re getting it in their pockets, they’re getting that money in their pockets if you use the formula that Bill Shorten laid down that if it’s not going into super, it’s going into a worker’s pocket. Okay, thanks very much.