Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Hansard source

In the non-farm sector, GDP grew by 0.6 per cent, to be 2.6 per cent higher through the year. The national accounts feature article, ‘Impact of drought on agricultural production’, suggests that the drought will directly subtract around 0.5 per cent from overall economic growth in 2006-07. Let me say that that is direct subtraction. Of course, it is not just the fall in farm production that has an effect on the economy. Once farm production falls, transport to the rural economy, wholesaling from the rural economy and services to the rural economy also detract. The detraction will be greater than 0.5 per cent once you take into account indirect effects as well as the direct effects.

To give you some idea of the effect of that, Mr Speaker, the ABS notes that production of wheat, barley and canola could fall by over 60 per cent, and agricultural income in the September quarter fell by 51.7 per cent. A 51.7 per cent fall in agricultural income is a very, very substantive fall indeed.

Outside the rural sector, however, consumer demand was considered to be at a moderate and sustainable pace. There is evidence of some recovery in relation to the building sector. Production in the mining sector increased quite substantially. We saw a redirection of the economy from the domestic sector towards the export sector—a welcome reshift.

Not only were incomes high—and the Prime Minister has already referred to the fact that the jump in incomes now means that the increase in real wages has been 17.9 per cent under this government—but corporate profits reached the highest share of GDP on record. That means we have a very, very profitable business sector in Australia which is supporting increased job creation—the strongest job creation we have seen in a generation. Indeed, in the last year, 245,000 new jobs were created in Australia. That means 245,000 of our fellow Australians are now in work as a consequence.

In the national accounts, measures of inflation were around three per cent lower than the consumer price index. The consumer price index has been knocked around by one-off factors in recent quarters. We would expect those to unwind in the quarters to come. What we have here is a picture of an economy which is still growing strongly in the longest expansion that Australia has ever experienced, knocked around by a very significant drought which is affecting rural production, but made up for by other sectors of the economy which are continuing to keep the economy growing and jobs being created.

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