Gross domestic product — The service sector dominates the Australian economy accounting for about 68 percent of gross domestic product. But its agricultural and mining sectors, which combined account for only 8 percent of GDP account for 65 percent of its exports. Manufacturing accounts for less than 12 percent of GDP. Australia is a major exporter of agricultural products, particularly grains and wool, and minerals including various metals, coal and natural gas. A downturn in world commodity prices can thus have a large impact on the economy. Australia's competitive advantage in primary products is a reflection of the natural wealth of the Australian continent and its small domestic market. Just over 22 million people occupy a continent the size of the contiguous United States.

 

GDP increased 0.5 percent in the second quarter, down from 1.1 percent in the first quarter of 2014. On the year, GDP growth eased to 3.1 percent from 3.4 percent. The 3.4 percent annual gain in the first quarter was regarded as exceptionally high due to a quirk in how Australian statisticians seasonally adjust mining output. Clement weather flattered how the contribution from the nation's mining industry was measured during what is traditionally a poor quarter.

 

Fourth quarter GDP was up 0.5 percent and was up 2.5 percent on the year. On the expenditure side, the quarterly increase was driven by net exports (0.7 percentage points) and final consumption (0.6 percentage points). These increases were partially offset by a decrease in inventories (down 0.6 percentage points).

 

 

First quarter gross domestic product grew at a faster rate than anticipated. GDP was up 0.9 percent on the quarter and 2.3 percent on the year. While the quarterly rate was faster than the fourth quarter, the annual rate was down from 2.5 percent. Net exports contributed 0.5 percentage points to GDP growth. Household final consumption expenditure and changes in inventories each contributed 0.3 percentage points. However, gross fixed capital formation subtracted 0.3 percentage points.

 

Like Canada, and unlike the U.S., UK and Europe, Australia releases GDP data once a quarter, usually about two or more months after the reference quarter's end and is usually the last of the major industrial countries to do so.

 

Retail sales — Like all consumer based economies, retail sales data provide a more current look at the sector's health. Sales were dampened by the RBA's three interest rate increases in 2009. Early in 2011, sales weakened as the interest rate increases began to bite. The RBA had increased rates seven times and retail sales continue to show the impact. The Queensland floods also put a dent into sales. The RBA eased interest rates in an attempt to rebalance the economy away from mining to other parts of the economy. From May 2012, the RBA reduced its key interest rate in a series of 25 basis points moves to its current 2.5 percent. It reduced its interest rate again in February 2015 to 2.25 percent.

 

 

May retail sales were up 0.3 percent on the month after declining 0.1 percent the month before. Sales were up 4.7 percent from a year ago. Sales increased in food retailing, household goods and other retailing. There were declines in department stores, clothing, footwear & personal accessory and cafes, restaurants & takeaway food services.

 

Regionally, sales were up in New South Wales, Queensland, Western Australia, the Australian Capital Territory and Tasmania. South Australia and the Northern Territory were relatively unchanged. Sales declined in Victoria.

 

Inflation — Unlike most other industrial nations, Australia releases its consumer price index and producer price indexes only once a quarter rather than every month. Second quarter 2015 CPI was up 0.7 percent on the quarter and was up 1.5 percent when compared with the same quarter a year ago. However, the preferred RBA inflation measures — the trimmed mean was up 0.6 percent and 2.2 percent on the year while the weighted mean increased 0.5 percent and 2.4 percent. The data easily remain in the RBA's inflation target range of 2 percent to 3 percent.

 

 

First quarter producer prices were up 0.5 percent on the quarter and were up 0.7 percent when compared to the same quarter a year ago.

 

 

Unemployment — A major problem for the Australian economy was not underemployment but rather a labor shortage that threatened to drive up wages and inflation. After reaching a low of 4.1 percent in August 2008, the unemployment rate climbed to 5.8 percent in June 2009 and remained at or near that level for several months. The unemployment rate declined to 4.9 percent in mid-2011. Since then, the unemployment rate climbed again. The unemployment rate currently is 6.2 percent.

 

 

Employment growth has slowed along with the resource boom. In 2010, employment for the year was up 287,000 jobs while in 2011, employment was up 66,800 jobs. In 2012, employment rebounded to a gain of 167,300. In 2013, only 43,500 jobs were created. Employment was volatile in 2014. For the year, the economy added 200,800 jobs. The data have been subjected to major revisions due to a malfunctioning seasonal adjustment program, according to the Australia Bureau of Statistics. So far in 2015, 120,700 jobs have been created. At the same time, the unemployment rate was 6.0 percent in June.

 

Merchandise trade — Trade was in surplus for 11 of 12 months in 2011. However, it recorded a deficit in every month in 2012. Both exports and imports declined six of 12 months in 2012. Exports were hit by weakening growth especially in China which is Australia's major export market. The strong Australian dollar also contributed to the pain.

 

 

After three months of surpluses at the beginning of 2014, the balance returned to a deficit in April 2014 and has remained in deficit to the present. Australia's merchandise trade deficit soared to the largest on record in April but eased to A$2.75 billion in May. Exports were up 0.8 percent while imports retreated 4.0 percent on the month.