The Bureau of Statistics has released detailed estimates on the economy’s performance in 2010/11. The net worth (wealth) of Australia – total assets less liabilities – stood at $8,089.9 billion as at June 30 2011, up by 2.8 per cent over the year in real terms and the strongest increase in 20 years of records.
- The value of all Australian homes hit a record $1,500.6 billion at June 30.
- Australia is a nation of savers again. Net national saving hit a record high of $119.9 billion at June 30 or 8.6 per cent of GDP.
- The largest industry sector is Finance & insurance services (11 per cent of gross valued added). Mining was next largest (10 per cent) from manufacturing (8 per cent).
- Labour productivity in the market sector fell by 0.3 per cent in 2010/11 after a strong 2.7 per cent increase the previous year. Productivity was best in agriculture (up 15.2 per cent) while it was worst in mining (down 16.4 per cent).
What does it all mean?
- Unlike many other countries across the globe, Australia’s balance sheet is in great shape. Not only did Australia’s net worth or wealth hit record highs over the past year, but also the 2.8 per cent lift in net assets was the strongest gain in the 20 years of records.
- Australia is a nation of savers again. Net national saving is at record highs and hovering near the highest levels since the late 1980s as a proportion of GDP.
- The annual national accounts contain a treasure trove of data detailing the financial position of the broader economy as well as key sectors. In addition there is a break-up of wealth held in Australia as well as the productivity performance of Australian industries.
- Latest data suggests that analysts have over-reacted to Australia’s productivity performance. While market sector productivity slipped 0.3 per cent last year, the previous year’s performance was the best in six years. While productivity fell last financial year, it did so because businesses were taking on more staff and equipment at a time when weather events were taking a toll on production. Productivity hasn’t been great but if the increase in employment and investment pay off in higher output in coming years, it will be well worth it.
- Still, with productivity near 1.5 per cent rather than 1.0 per cent, if interest rates are to stay at lower levels, workers need to get used to 3.5 per cent wage increases a year, rather than 4 per cent. Either that or inflation needs to trend closer to 2.0 per cent a year rather than 2.5 per cent.
What do the figures show?
- The net worth (wealth) of Australia amounted to $8,089.8 billion at 30 June, up 2.8 per cent in real terms – the fastest growth rate in 20 years of records. Household wealth rose by just $7.1 billion but still hit record highs of $6,000.9 billion. The net worth of Australian businesses (non-financial) hit a record $884.9 billion at June 30.
- The value of all Australian homes stood at a record $1,500.6 billion at June 30.
- National net saving rose from $90.7 billion (7.0 per cent of GDP) to $119.9 billion (8.6 per cent of GDP) in 2010/11.
- Labour productivity fell by 0.8 per cent in 2010/11 after rising by 2.3 per cent the previous year. In the market sector, productivity fell by 0.3 per cent in 2010/11 after a strong 2.7 per cent increase the previous year (best in six years).
- Productivity was strongest in agriculture (up 15.2 per cent) followed by professional, scientific and technical services (up 3.8 per cent). Productivity fell the most in mining (down 16.4 per cent) followed by rental hiring and real estate services (down 13.4 per cent).
- Real unit labour costs in the non-farm sector fell by 0.1 per cent in 2010/11 – the third year of declines.
What is the importance of the economic data?
- The Australian Bureau of Statistics releases the Australian System of National Accounts publication each year. The data includes the national balance sheet, estimates of productivity and a comprehensive assessment of Australia’s performance over the last financial year.
What are the implications for interest rates and investors?
- Corporate and household balance sheets are in great shape in Australia. While other parts of the globe are experiencing some pain in deleveraging, the same pain doesn’t need to be endured by Australians. The results may seem surprising but not only is wealth at record highs in Australia, but it grew at the fastest real pace on record last year. The Reserve Bank may view the performance as yet another reason to stay on the interest rate sidelines.
- Australia’s productivity performance is worthy of greater investigation by governments, policymakers and investors alike. While productivity fell last year, new estimates showed it soared in the previous year. And if this year is another year of consolidation of employment and investment, but stronger output, then productivity could emulate the 2009/10 performance. And that would suggest that there is little to worry about.
- The Reserve Bank must be bemoaning the constant data revisions. The latest figures show that real unit labour costs continue to fall. If that is the case, then there is less reason to worry about inflation. Latest figures suggest that inflation is well under control and doesn’t stand in the way of a rate cut, if needed.
- Mining productivity hasn’t just been poor over the last year, but it has weakened for some time, dragging down the national result. It is a result deserving of more attention.