Australian National Accounts- December Quarter 2008

On 4 March 2009 the Australian Bureau of Statistics released the National Accounts and Balance of Payments for the December 2008 Quarter.   National accounts are designed to provide a summary of national economic activity and to present a statistical picture of the structure of the economy and the detailed processes that make up domestic production and its distribution. The financial accounts show the financial assets and liabilities of the nation and of each institutional sector, the market for financial instruments and inter-sectoral financial transactions. The balance sheet is a comprehensive statement of produced and non-produced assets, liabilities to the rest of the world and net worth. Input-output tables show which goods and services are produced by each industry and how they are used.

The much anticipated figures released yesterday show the extent of the impact of the global financial crisis on Australia’s economy.

  • Seasonally adjusted, GDP contracted by 0.5% in the December2008 quarter.
    Note: A technical recession is defined by two consecutive quarters of negative economic growth.  The September 2008 Quarter GDP figure saw the economy grow at a rate of 0.1%.
  • Over the year to December, GDP rose by just 0.3%, the weakest annual rate since the 1991 recession.  Non-farm GDP decreased by 0.8% for a flat annual rate.

Percentage changes, Volume measures
Graph: Percentage changes, Volume measures


  • Farm GDP grew strongly, rising by 10.8%, but this was more than offset by the fall in non‑farm GDP.
  • In seasonally adjusted terms, the largest negative contribution was from business inventories –stocks on shelves and in warehouses –dropping 1.6% as businesses reduced inventory levels during the quarter, aligning their production with expected demand.
  • This was offset by positive contributions from imports (1.7 percentage points) and private business investment (0.2 percentage points).
  • Business investment growth slowed further in the quarter to 1.1 per cent. Nonetheless machinery and equipment investment rose by 0.3 per cent and non‑dwelling construction rose by 1.9 per cent. Major private engineering projects continued to underpin investment.
  • On the expenditure side, the growth (in seasonally adjusted volume terms) over the past four quarters was driven by Machinery and equipment private investment (0.9 percentage points), Private non-dwelling construction (contributing 0.8 percentage points) and Exports of goods and services (0.8 percentage points). Offsetting the growth during the past four quarters was a rise in Imports of goods and services (detracting 0.6 percentage points).
  • On the production side, the strongest contributing industries to GDP growth (in trend volume terms) over the past four quarters have been Property and business services, Construction and Agriculture (all 0.3 percentage points). The biggest detractions have come from Manufacturing (-0.2 percentage points) and Finance and insurance (-0.3 percentage points).


Selected Industries Contribution to growth, Dec 07 to Dec 08: Trend
Selected Industries Contribution to growth, Dec 07 to Dec 08

  • The Terms of trade fell 2.8%.  The Terms of trade represent the relationship between the prices of exports and imports. A decrease in the Terms of trade reflects export prices decreasing at a slower rate than import prices. The Terms of trade fell 2.8% in seasonally adjusted terms in the December quarter following a 6.2% increase in the September quarter.
    Note: This is the ratio ratio between export prices to import prices. If export prices are higher than import prices, the terms of trade are said to be favourable.
  • Real gross domestic income fell 1.2%.
  • In trend terms, GDP decreased 0.1% and Non-farm GDP decreased by 0.3%.
  • Household consumption expenditure increased 0.1% in seasonally adjusted terms. The main positive contributors to growth in seasonally adjusted terms were Rent and other dwelling services (up 0.6%) and Food (up 0.6%). The main negative contributors in seasonally adjusted terms were hotels, cafes and restaurants (down 1.0%), clothing and footwear (down 1.3%), alcoholic beverages (down 2.4%) and purchase of vehicles (down 1.2%).
  • The Household saving ratio was 6.6 in trend terms and 8.5 in seasonally adjusted terms in the December quarter 2008. This seasonally adjusted number is the highest since September 1990.

Household saving ratio, Current prices
Graph: Household saving ratio, Current prices

Treasurer Wayne Swan noted that ‘…although the Australian economy has held up better than most other economies, the inevitable impact of the global recession is clearly evident in [the] data’. Many countries including the United States, the UK, Europe and Japan suffered much deeper contractions in GDP in the December quarter. Australia’s GDP outcome is better than all of the G7 economies.  Also, 19 of the 22 OECD countries that have reported December quarter figures contracted during the quarter and this weakness continues to weigh heavily on household spending, investment and exports.

December Key Figures

% change
Sep qtr 08 to
Dec qtr 08
% change
Dec qtr 07 to
Dec qtr 08
GDP (Chain volume measure)
Trend -0.1 0.6
Seasonally adjusted -0.5 0.3
Final consumption expenditure (Chain volume measure)
Trend 0.1 1.2
Seasonally adjusted 0.1 1.0
Gross fixed capital formation (Chain volume measure)
Trend 0.7 7.0
Seasonally adjusted 0.1 6.7
GDP chain price index
Original 0.4 8.5
Terms of trade
Seasonally adjusted -2.8 16.5
Real net national disposable income
Trend 1.0 6.4
Seasonally adjusted -1.6 4.8

Australian Bureau of Statistics, Australian National Accounts: National Income, Expenditure and Product, Dec 2008
Treasurer’s Media Release, National Accounts –December Quarter 2008
Treasurer’s Media Release, Balance of Payments –December Quarter 2008
The Australian article, Economy Grinds to a Halt 5 March 2009