Key Points
Contrary to volumetric measures, Australian Nominal GDP continued to grow at a phenomenal rate in the March Quarter, even continuing to gather pace from the December Quarter.
Australian nominal GDP growth was driven all but solely by the commodities boom, with the mining sector contributing the most to economic activity by a sbstantial margin in terms of actual Australian dollar value add.
The strong accrual of new wealth by non-financial companies reflected volatility more than a long-term trend. However, if we "zoom in", we can see a long-term downward drift in wages and salaries (from a high base) as a share of GDP and a drift upward in profits (from a low base).
Nominal GDP explains exuberance in the Resource States (Queensland and Western Australia), but also suggests a cautionary note that the good times are underwritten by prices rather than underlying productive capacity.
National accounts: what it is, why it matters
The national accounts are the touchstone Australian economic dataset. They give us a picture of the wealth created across the Federation during a quarter year. We summarise this in a single number: Gross Domestic Product (GDP). GDP is added up in three ways:
GDP-E: by expenditure, what some might call the “demand side” of the economy, which includes household and government consumption and investment and international trade.
GDP-O: by output, what some might call the “supply side” of the economy, which adds gross value added by each sector of the economy.
GDP-I: by income, what we might call the “circuit closer”, which adds up income accruing to workers, companies, governments, and landlords.
Economists almost always focus on “real” GDP which seeks to hold prices constant across time to get at the underlying volume of production and exchange within the economy. This is important and valuable, otherwise we might mistake price inflation for growth in Australia’s productive capacity. But nobody actually gets paid in real GDP. Australians get paid out of nominal GDP, they buy goods and services using nominal GDP, and they make their investments in nominal GDP.
So, following our updates focussed on real GDP, we conclude our analysis of the national accounts by looking into nominal GDP-O and GDP-I. We begin, as always, with GDP-O to see what sectors are creating growth in actual Australian dollar terms on the supply side of the economy. Then, we pivot to looking at how that actual Australian dollar wealth is being distributed between the “great estates” of Australian society using GDP-I: workers, companies, governments and landlords.
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