GDP indicates Australia was doing alright….in December 2010

The Australian Bureau of Statistics released the December 2010 quarter Gross Domestic Product (GDP) figures this week.  The data reaffirmed what we already knew, the Australian Economy was performing quite well during the final quarter of 2010.

Over the quarter, GDP grew by 0.7% which was in line with the market expectation.  The quarterly growth figure took annual growth during 2010 to 2.6%.  The GDP read for December was also in line with the Reserve Bank’s forecast of 2.75% as published in their most recent Statement on Monetary Policy.

The GDP figures revealed that disposable incomes have recorded strong growth over the year.  Year on year, net disposable incomes have increased by 7.2%.  Also important to note is that at the same time during 2009, net disposable incomes had actually fallen by -5.1% over the year, indicating that there has been a sharp rise in disposable incomes.  This growth in disposable incomes is commensurate with the improving economic conditions and recent growth in wages which is well above the rate of inflation.

The GDP figures also revealed that Australian consumers are continuing their relative conservatism, saving more of their net income.  During the December 2010 quarter the net savings ratio was recorded at 9.7%, an increase from the 8.0% net savings ratio the previous December however, down slightly from 9.8% during the September quarter.  Although the savings ratio was at slightly higher level during late 2008 and early 2009, current ratios are amongst the highest since 1989.

Despite the generally positive GDP results for the December 2010 quarter, it is anticipated that next quarter’s GDP will be adversely affected by the recent floods and cyclones across the country.  During January mining and agricultural output has been affected and as a result GDP will likely also affected by the slowdown in output.

Currently, growth in GDP is slightly under trend – so while the figure is quite healthy Australia’s economic growth is actually below the long-term average.  Also important to note is that Australia is now well into its 20th year of growth.

Despite the anticipated slowdown during the next quarter, the recent forecast from the RBA suggests that GDP growth will continue to increase over the coming years.

For the property market, this week’s GDP results coupled with this week’s RP Data- Rismark Home Value Index results indicating flat to slightly falling property values coupled with an Australian economy that continues to grow.  This will likely result in an improvement in home loan affordability, particularly when you consider that disposable incomes are growing solidly and at a level well above inflation.  Despite the GDP figures we continue to expect that affordability constraints and the likelihood of higher interest rates will hamper any significant growth in property values this year.  Should values remain flat and GDP figures continue to show increases to disposable incomes we would expect that housing affordability will continue to improve throughout the year.

About Cameron Kusher

Cameron Kusher is Head of Research at CoreLogic, specialising in primary and secondary data analysis, property market commentary and consultancy. Cameron has a thorough understanding of the fundamentals such as demographics, trends, economics and spacial analysis and is a regular keynote speaker for property-related groups, regulated industry bodies, corporations and the government sectors. Follow Cameron on Twitter @cmkusher

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4 Responses to GDP indicates Australia was doing alright….in December 2010

  1. Shadow March 4, 2011 at 2:36 pm #

    Hi Cameron,

    You may be interested in some research we’re doing on the Zetaboards property forum into the leading and lagging indicators for house prices. You can see a list of the indicators that we have come up with so far here…

    Australian Housing Market – Leading and Lagging Indicators

    GDP (which you discuss here) is one of the indicators, and we have identified many others. We also note the strong correlation between house price growth and auction clearance rates (a leading or ‘real time’ indicator).

    Anyway, it is work in progress. Ultimately we hope to gather historical data for all these indicators, weight each one somehow, combine them, and then overlay them with a chart for actual house price growth. Then we should be able to see if there is a leading correlation between the indicators and house price growth, from which it may be possible to estimate future growth (maybe 3-6 months ahead) based on current indicators.

    Cheers,

    Shadow.

  2. Jeff March 4, 2011 at 11:21 pm #

    Hi Cameron,

    I note that “it is anticipated that next quarter’s GDP will be adversely affected by the recent floods and cyclones across the country. During January mining and agricultural output has been affected and as a result GDP will likely also affected by the slowdown in output.” Yet the February 2011 RBA forecast has June 2011 GDP at 3.25% up from actual 2.6% for December 2010. How does that work?

    Thumbs up to the blog by the way.

    Cheers,

    Jeff

    • Cameron Kusher March 5, 2011 at 8:33 am #

      Hi Jeff

      The Statement on Monetary Policy was released prior to the RBA having assessed the full impact of the natural disasters. They have since stated that they expect the output of the economy to slow due to the floods and cyclone.

      Cameron

  3. scott ryan January 5, 2016 at 4:08 pm #

    This is what we have to do. Australia needs to rise the GST by 2.5% and do a big biz tax like the carbon tax again.

    Them 2 taxes will bring in $28 billion pa to do this to save the public money make jobs and boom the economy. It will also stop a rise in the cost of living “meaning” pay rises.

    This saves the public $1k a year and small biz saved 2.

    We can self fund departments for life by putting the money in banks safe interest funds, that pays for the cost of a publics cost of living. That means public living expanses / department. It would even pay for a rise in cost of the department each year. That’s done buy putting that much money into it, that it even puts back in interest that pays for rising cost each year.

    This is how it would work. It’s for Adelaide Australia but would work the same in America.

    Self Funding publics cost of lining….Adelaide’s water bills.

    Adelaide water company made about $350 million dollars last year.

    Adelaide would need $12 – $14 billion dollars put into and safe interest fund, to self fund it for life. It works by using the interest made “$613 million dollars pa” to pay for it. It makes more interest than what it cost, so it puts back in the extra interest it makes and save it up “making interest” off the interest. We put back in $263 million dollars pa “or” $1.3 billion dollars making 6% pa in 5 years time. Every 5 years the department can have a rise $57 million dollar jump in cost, or $12 million a year. That means each year it will make $12 million dollars. It will rise by $12 million every year for life. That’s $120 million dollar rise in 10 years. That’s like a 33% rise every 10 years in the departments cost.

    The gov still collect their taxes ad more each year.

    In Adelaide that will save the public about $1k – $2+k pa. It will also save small biz big bucks 2. Farmers will be lol and the cost of fruit and veg will drop drastically…Maybe.

    Each year they could save the public $1k a year. That $1k get’s spent in the economy and the gov collects 30 – 40% tax of the $1k * 300 million people. The money small biz owner make will be spent to. So it’s 30 – 40% of the $1k boost to the economy.

    The public would pay a $1k tax a year. So after the second year they save $1k. After 7 years the public would have a spare $5 – $6k pa, and would pump $1.6 trillion dollars into the American economy. The gov will get 30 – 40% of that money spent in taxes. That hands them $600 billion dollars pa. Now add the % of money small biz makes as profits and spends from that $1 trillion left over. Clearly big biz will get a boost 2, so the 1 owner would spend much. It would have to be worked out the % small biz will make and big biz, to work the the extra boom to the economy and taxes paid.

    It’s not hard 2 do, and it would stop the cost / rising cost from rising. In fact it would let everyone have a wealthy life and happy 1 at that.

    All country’s around the world can do this and boom the economy make mass jobs and collect mass billion of dollars each year in their budgets. If it’s not done now it will be to late, as big biz pay big taxes now. Really need to tax company’s a small % of what they should be paying.

    The good part of that, is the departments are self funded for life. It pays for rising cost so it’s done for life. After 7 years and saving the public 45k – $6k. They would self fund the state hospitals and government departments cost for life after saving the public that much cash..

    Not only can the public keep saving 1k a year. All state departments would be fully self funded with sate government getting part of the billions paid in tax each year.

    Make the public wealthy. Makes the state government’s rich and hands the fed’s mass billion in knew funding. It also stops a rise in wages and the cost of living.

    The thing is different departs can save the public more money. If you look at Australia you would see that the power company make $40 billion dollars pa. Too turn AU 100% power grid green it would cost $70 billion dollars. That means within 2 years of that money, they would make all the money back + $10 billion dollars.

    Some departments can be looked at, to save the public more money first. Even doing projects with privet company’s that are already digging up roads and laying pipe lines and so on.

    You fist look at the cost to everyone. Self fund the department that dose 2 in 1 first.

    Such a hard world we live in.

    Lots of that money to self fund it can be handed to the banks to make interest and invest the money. That booms the country even more.

    I would also force the public to put $30 a week extra into there super funds “because” they are saving $6k a years now. That will boost the economy in every way possible.

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