Why GDP and the National Accounts matter

This Wednesday, 7 September 2022, the ABS will publish the June quarter National Accounts which will contain the GDP growth estimate for the quarter. Economists will look closely at the numbers for signs of the economy’s strength. Some economists are expecting strong growth due to booming exports. ABS Business indicators released today revealed growth in company gross operating profits of 7.6% (seasonally adjusted) in the June quarter. Wages and salaries increased 3.3% in seasonally adjusted terms. On Wednesday, when the full National Accounts are published, there will be media commentary on just how well the Australian economy is positioned to withstand rising interest rates as the RBA tries to slow down accelerating inflation.

The National Accounts tells us about how the economy is performing in the short-run and how it is evolving over the long-run.

This century’s great trends in the Australian economy are evident in the National Accounts data (Chart 1):

  • a halving of the relative economic contribution of domestic manufacturing, partly due to the car industry shutdown;
  • the periodic resources booms which have propelled the mining sector to a higher average share, but one which is volatile and dependent on commodity prices; and
  • the continued growth of the post-industrial economy and services sectors, with ever-growing health care and social assistance (e.g. NDIS) and professional services industries.

In his Substack newsletter Australian Economy Tracker, Brisbane-based economist Brendan Markey-Towler has commented regarding the Australian economy over the last decade as follows:

“To put it somewhat tritely: Australia is less and less a country that derives its wealth from making and building things, still a country that makes its wealth by digging stuff out of the ground and renting houses, and more and more a country that consults and cares.”

Adept Director Gene Tunny spoke with Brendan about his Substack article last month and the conversation is available as the Economics Explored podcast episode “GDP & the National Accounts: What they are and why they matter”, available on all good podcasting apps, including Google Podcasts and Apple Podcasts. Brendan’s enthusiasm for the National Accounts is impressive. Brendan reminds us just what an outstanding intellectual achievement they were and how important they are to understanding our short-run economic performance and longer-term trends. 

Published Monday 5 September 2022. Please send any questions, comments, or suggestions to contact@adepteconomics.com.au or call us on 1300 169 870. 

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