GDP

Wayne Swan: economic growth due to stimulus | Business | News.com.au

What is GDP? Why should I care?

Gross domestic product tells us if the economy is growing or shrinking, by measuring the number of goods and services bought and sold.

A negative figure means fewer consumers are shopping; companies are producing less and could signal the start of a recession – defined as two quarters of negative GDP in a row.

Today's positive figure means the economy is growing and jobs are being created.

In the previous quarter, the economy grew by an unrevised 0.4 per cent. Spending by households rose 0.8 per cent in the quarter, and investment in housing dropped 5.6 per cent.

The economy grew by a relatively solid 0.6 per cent in the year to June, showing Australia has escaped recession by posting positive growth figures over the past two quarters.

GDP measures the total output and input by the country: effectively the total income for Australia over the past three months.

Economists say it's the most comprehensive measure to see how the country is going, and which parts of the economy are doing the best in the downturn.

Interest Rates

Homeowners received a reprieve yesterday when the Reserve Bank decided to keep official interest rates on hold at 3 per cent.

It was the fifth month in a row the RBA left rates alone, waiting to see if further rate cuts would be needed to jump-start the economy after the stimulus plan and global recession.

Explaining his decision, Reserve Bank Governor Glenn Stevens said the economy had been more resilient that expected, with the global recession reaching "a turning point".

But Treasurer Wayne Swan said homeowners should prepare for rate rises down the track.

"As Governor Stevens has said, rates are at emergency levels right now, and of course at some stage in the future they can be expected to move," he said.

How do we compare?

Australia may come out of the financial crisis as the only developed country to avoid a recession.

With the US, UK, European and Asian economies falling off a cliff soon after share markets crashed late last year, Australia has merely stumbled badly in comparison.

In Europe, recessions in France and Germany officially ended this week, but the real recovery is expected to be slow and difficult.

China, a key trading partner for our exports and resources, is faring better with economic growth to 7.9 per cent.

Things look worse in the UK, where the economy shrank by 0.7 per cent between April and June. The UK economy's drop of 5.5 per cent over the year is the largest since records started in 1955.

And despite talk of 'green shoots' the US economy shrank by 6.4 per cent between January and March, for an annual decline of 1 per cent.