Economy posts broad growth in September quarter

Economy posts broad growth in September quarter

Australia's economy expanded 0.6 per cent in the September quarter and grew 2.8 per cent over the 12 months to September, official figures show.

The annual growth rate of 2.8 per cent was up smartly from a revised 1.9 per cent previously, and partly reflected the 0.4 per cent growth contraction recorded in the 2016 September quarter dropping out of the equation.

Compensation of employees increased in all states and territories, resulting in a national quarterly growth of 1.2 percent and yearly growth of 3.0 percent.

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Bill Evans, chief economist at Westpac, said pressure is building on consumers and it is forcing a change in spending patterns that threatens to choke off growth.

But economists say the growth figures are disappointing because the strength in private investment has masked worryingly weak household consumption.

Treasurer Scott Morrison welcomed the acceleration in on-year growth, focusing on the jump in company spending.

The household savings ratio also ticked up 0.2 per cent to 3.2 per cent, suggesting that households have been reluctant to run down savings to fund consumption.

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"The big concern is whether households, the engine of the economy, accept that expectations of a lift in wages growth are unjustified and it becomes necessary to adjust spending to a lower income outlook", he said.

However, household consumption was "soft" even though October's retail sales figures, released on Tuesday, showed some improvement.

Private investment rose 4.5 percent last quarter, the largest gain in four years.

But a cloud still hangs over the Australian consumer, with record household debt, years of record-low wages growth, and, more recently, softening house prices.

The main driver of growth in the third quarter was engineering construction, with a small assist from a build up in inventories.

About 17 out of 20 industries recorded growth during the quarter, underlining the improvement in business conditions and corporate earnings over the a year ago.

"Business conditions, as surveyed, are at their highest level in 20 years. our enterprise tax plan is a key part of this, which is why it must be supported".

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