HIA bursts Swan's economic bubble

by Adam Smith07 Jun 2012

The housing industry has dismissed Treasurer Wayne Swan's optimism over strong national accounts figures.

Swan yesterday unveiled figures showing 1.3% GDP growth for the March quarter. He pointed to the figures as a sign of the underlying strength of the Australian economy.

"This is a remarkable outcome and reaffirms Australia's position as one of the strongest economies in the world, with the Australian economy growing faster than every single major advanced economy in the March quarter.

"In through the year terms, this result is the fastest growth in over four years, which have been the most turbulent in the global economy since the Great Depression of the 1930s," Swan said.

But HIA senior economist Andrew Harvey claimed the numbers only served to highlight Australia's two-speed economy, with many industries doing it tough in spite of the mining boom.

"The headline result of 1.3% GDP growth in the March 2012 quarter is excellent and well above expectations, but once we drill down it really is a story about the mining states which are headlining economic production, versus the others which continue to do it tough. Quarterly growth in Western Australia and the Northern Territory was phenomenal while NSW went backwards," he said.

Dwelling investment detracted from 0.1% from quarterly economic growth, the HIA said, as new housing expenditure fell 0.3% for the quarter and expenditure on renovations fell 4.4%.

"New dwelling investment has now fallen for four consecutive quarters, while renovations have detracted from growth in the last two quarters. Meanwhile, engineering construction, driven by mining, contributed 1.1 percentage points to quarterly growth - without this component quarterly GDP would have grown by just 0.2%," Harvey said.

But Harvey did see hope in figures showing household consumption grew by 1.6% over the quarter.

"The good news is that consumers do seem to be spending again, the aggregate GDP growth figure should help confidence and [Tuesday's] interest rate cut will help underpin residential building going forward. However, there's no doubt the challenges posed by the multi-speed economy will continue to see non-resource sectors face significant headwinds," he said.