Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Hansard source

I thank the member for his question. The December quarter national accounts released last week show that growth eased in the quarter but it still remains very solid. Growth was 0.6 per cent in the December quarter and it was 3.9 per cent over the year, and domestic demand continues to grow strongly. It is driven by strong growth in consumption. Domestic final demand rose by 1.6 per cent in the quarter to be 5.7 per cent higher for the year. Australia’s net exports continue to weigh on growth, reflecting ongoing weakness in export volumes and strength in imports. This strong growth in imports is further evidence that domestic demand continues to outpace domestic supply, highlighting the importance of the government’s supply-side policies.

While domestic demand has been growing strongly, it has not been matched by increases in the economy’s productive capacity. The national accounts show that productivity growth in the last year of the Howard-Costello government was zero. This reflects the pattern of long-term decline in Australia’s productivity performance, with average productivity growth over the last five years lower than in any other equivalent period in the last 16 years. Precisely at this time, when Australia’s productivity growth was declining, underlying inflationary pressures in the Australian economy were building. These figures paint a valuable portrait of the economic landscape that we inherited—an economy with strong demand but shackled by poor productivity growth and capacity constraints in the economy. These figures underscore the need to modernise the Australian economy and to lift our productivity—

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