How is the Australian economy doing?

Yesterday the ABS presented a report on the state of the economy. The news was somewhat mixed.

The good news was that the economy is growing more strongly than expected. An annual rate of 3.1% after a strong first quarter. This is encouraging as it suggests that growth might continue to pick up over the next year or so.

However there was bad news on business investment, which contracted 2.2%. Investment is a component of Aggregate Demand and a driver of future growth on the supply side.

There was also bad news on real disposable income per capita which has been declining for two years according to the ABS. This means the purchasing power of households is declining and so lower material living standards will follow.

The picture is very mixed. The 'third phase' of the mining boom is driving output and exports. The third phase of the mining boom is the 'production phase', all those new and larger mines producing coal, iron ore and LNG. But the mining sector is located in remote Australia and provides few jobs, so most people will not see the benefit of this economic growth.

The ABC covers the report here (some nice graphs)

This article is most relevant to VCE students who must know how the Australian economy is performing and what the major demand and supply side influences are on the economy. IB students will be able to use it to understand how economic performance is measured and draw the inference that not all indicators point in the same direction.