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June quarter GDP might exceed expectations

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2023-09-05

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The June quarter GDP data and 2022-23 national accounts for Australia might exceed expectations due to surprisingly robust contributions arising from a weaker trade performance during the same period, coupled with increased government spending.

According to data from the Australian Bureau of Statistics, the public (government) demand could potentially contribute 0.5% to GDP growth, while the external (trade) account might yield a substantial 0.8% boost despite a decline in terms of trade, exports, and income.

This positive outcome comes despite lowered prices for key exports like coal, LNG, and iron ore.

Projections suggest that business investment could slightly surpass previous estimates, although building investment is anticipated to remain weak. Household spending is predicted to be mixed, potentially detracting slightly from overall growth.

The potential 0.8% contribution from the trade account, if realized, would be twice as much as the figures estimated by most economists who predicted around 0.4% contribution, with growth estimates ranging from 1.8% to 1.9%.

However, nominal GDP is expected to remain weak, with the ABS reporting a 7.9% decline in terms of trade for the June quarter. This follows a 2.8% increase in the preceding three months leading up to March.

The ABS also reported that the current account balance (seasonally adjusted, current price) for the June quarter of 2023 reflected a surplus of $7.7 billion. This marked a decrease of $4.8 billion from the revised March figure of $12.5 billion (originally just over $12.3 billion), primarily due to the fall in prices of key export commodities. The net primary income deficit showed improvement, easing to $23.4 billion from the $26.7 billion deficit in the March quarter.

As of the end of June, Australia's net international investment liability position stood at $822.2 billion, down by $94.1 billion from the revised position of $916.3 billion in the March quarter (initially $862.3 billion).

Simultaneously, the higher-than-forecast government contribution was aided by a significant surge in tax revenues during the June quarter. Tax revenues experienced a remarkable 23.7% increase, reaching $224 billion. This boost led to a more than 19% rise in total government revenue, exceeding $266 billion across all government levels. Consequently, the general government net operating balance rose from $25.8 billion to $32.5 billion.

The ABS affirmed that government investment is projected to add approximately 0.4% to GDP, with government spending contributing around 0.1% to the overall growth figure.

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