It's not much to write home about

Australia has been a mighty little economy for years, but there are warning signs in the June quarter national economic numbers.

Australia has been a mighty little economy for years, but there are warning signs in the June quarter national economic numbers.

First, some bouquets. Gross domestic product (GDP) in the year to June got to $1.5 trillion for the first time. It has grown by $590.2 billion or 64 per cent since 2004-2005, and by 28.5 per cent since 2007-2008, the year of Labor's election win. It has also expanded by 7.6 per cent in the past two years, including a 2.6 per cent rise in the year to June ruled off by Wednesday's national accounts.

The nation is more productive. GDP per hour worked rose by 1.8 per cent in the year to June, although only by 0.3 per cent in the June half. It has risen in seven of the past eight years (2010-2011 was the exception) for a total gain of 8.6 per cent. Real unit labour costs have declined by 3.25 per cent over the same period.

Exxon Mobile has the record for the world's biggest profit, $US45.2 billion in 2008. Australia's GDP "profit" in the year to June was 30 times larger.

There are, however, continuing signs in the latest accounts of the weakness that the Reserve Bank has been grappling with, and the Coalition will probably be dealing with after Saturday's election.

Real net national disposable income is GDP recalculated to take into account movements in the terms of trade, offshore payments including interest on overseas borrowings, and offshore receipts including dividends. It is about as close as you can get to a net profit in the national accounts, and it is losing its mojo.

The longer-term numbers still look good, although not as good as GDP. Net national disposable income was $933 billion in 2004-2005, $974 billion in 2006-2007, $1026 billion in 2007-2008 and $1187 billion in 2012-2013. Growth since 2004-2005 has been 27.2 per cent, and since Labor's election in 2007-2008 it has been 15.7 per cent.

They are OECD league-table-topping numbers, but as the resources investment boom that helped propel Australia through the global crisis tails off, net national income growth is slowing. It was only 5 per cent in the past two years, 0.7 per cent in the latest year to June, and just 0.4 per cent in the June quarter.

If you want a version of gross earnings in the economy, total factor income is the best measure. It embraces public and private corporate income and wages and salaries, and it too is approaching stall speed.

It has expanded by 63 per cent since 2004-2005, and by 27 per cent since the global crisis began in 2007-2008, and is still growing solidly in some sectors. The gross operating surplus of financial corporations expanded by 2.7 per cent in the year to June, for example. Overall, however, Australia's gross operating surplus expanded by only 5.3 per cent in the past two years, and growth in the year to June 2013 was a funereal 0.1 per cent.

We are talking about a big enterprise here. Verizon's $130 billion buyout of Vodafone's stake in the American mobile network operator, Verizon Wireless, is the third-largest corporate acquisition in history, behind two over-priced deals - Vodafone's own $US203 billion takeover of Germany's Mannesmann group in 1999, and AOL's $US181 billion reverse takeover of Time Warner in 2000. The price tag on Australia if it were for sale would be about $13.4 trillion - a takeover multiple of 10 times the economy's total factor income "gross earnings" of $1340 billion in the year to June.

The earnings multiple on Australia is going to drop if it doesn't rediscover its growth momentum, however, and the national accounts show no convincing signs yet that a handover from the fading resources boom to the rest of the economy is under way.

The value of output from the mining sector rose by 17.6 per cent in two years and 8.1 per cent in a year, but it rose by only three-quarters of a percentage point in the June quarter.

A 1 per cent slide in state final demand in Western Australia during the year is another sign of the resources slowdown, and the non-resources sectors continue to be mixed, with financial services boosting GDP by 0.7 percentage points during the year and health care contributing 0.3 per cent, but manufacturing deducting 1 per cent.

The headline GDP growth numbers surprised slightly on the upside on Wednesday, and Labor can argue that the full force of a lower Australian dollar and low interest rates is yet to be felt.

Executives who preside over an earnings slump risk being sacked, however. There's not much in the latest national accounts to shore up Labor's credentials as it prepares to face the shareholders of Australia Inc on Saturday.

mmaiden@fairfaxmedia.com.au

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