National Economy

National economy

Trends: The national economy has continued recent trends of levels of growth of circa 2% per annum, but a per capita decline of 0.5% per annum.

Latest: The latest data points show a 0.2% growth for the third quarter of 2023, down from a 0.4% growth for the second quarter of 2023.

At the national level, Australian Bureau of Statistics (ABS) data shows a quarterly rise in Gross Domestic Product (GDP) of 0.2% for the third quarter of 2023, continuing the previous quarter’s trend and giving a 12 month rise of 2.1% (chain volume measures). GDP per capita fell 0.5% due to the continued uptick in migration post-COVID. The ABS Australian National Accounts: National Income, Expenditure and Product, September release highlight the following points:

  • Domestic demand has remained strong and been a primary upward driver of growth, providing a 0.5% increase in the quarter.
  • Government expenditure and capital investment both contributed 0.2% points to GDP growth. Changes in inventories, principally mining inventories, contributed 0.4%.
  • Net trade was the largest drag on GDP growth, detracting 0.6% from GDP. There was a 0.7% fall in exports, offsetting a 2.1% increase in imports.
  • Household spending was flat in the third quarter in chain volume measures, capping a 0.4% increase for the whole year.
  • Compensation of employees rose 2.6% due to tightness in the labour market and resultant wage growth.
  • The household saving to income ratio has declined to 1.1%, the lowest level since December 2007.

Prices of key export commodities, combined with international inventories was mostly responsible for the decline in exports, whilst oil prices led to increases in import prices for the quarter. See ABS for more info.

Business performance

The NAB Group Economics update for December 2023 shows:

  • Business conditions declined slightly at the end of 2023 both for NSW and Australia. While down from earlier peaks, the trend lines are still above long-term averages. Declines in conditions were led by manufacturing and construction and were a result of declines in trading conditions and employment indicators.
  • Business confidence measures are more mixed. Both state and national levels saw a large dip in November followed by a recovery in December 2023 to end close to zero. The indicators both remain well below long-run averages.

Data source: NAB Group Economics

Household spending

The ABS Monthly Household Spending Indicator from November 2023 for New South Wales indicates:

  • An increase in household spending of +2.2% compared to November 2022 in current prices.
  • An increase in spending on services of +5.6% and a decrease on goods of -1.1% since November 2022, continuing previous trends.
  • An increase in non-discretionary expenditure of 5.6% with a fall for discretionary expenditure of -1.1%, also continuing previous trends.

The consumer price index rose 4.3% in the 12 months to November 2023. This is down from a peak of over 8% in December 2022, but still well above long-term averages. Housing (+6.6%), food and non-alcoholic beverages (+4.6%), insurance and financial services (+8.8%) and alcohol and tobacco (+6.4%) have been the main drivers. The latest data for November 2023 shows a tapering in transport, recreation and food and non-alcoholic beverage prices. Price increases in services are starting to overtake the large price increases seen in goods in the post-COVID years. In terms of international trade, the prices of tradeable goods are now declining significantly faster than average.

Data source: ABS Monthly consumer price index indicator

The ABS also publishes specific price data on housing related expenses to give better insights (at the national level) about the price movements of purchases, rents and other expenses. Rents and natural gas have seen the largest price increases. Electricity costs have also increased circa 25% since the low points of 2021.

Data source: ABS Monthly consumer price index indicator

Rising costs of construction (for both private and public housing) has been of particular interest due to the elevated material costs since COVID and the rising labour costs now occurring. At the same time, there is significant interest in addressing the shortfall in affordable housing. The construction price index (data for Sydney) shows the rapid rise in costs since January 2021 have started to peak, with levels stabilising nearly 40 percentage points above pre-COVID levels.