The early signs for the GDP figures were not good – capital expenditure was weak and the outlook terrible, and on Tuesday the latest balance of payments figures showed that net exports would contribute nothing to GDP growth in the December quarter.

But then the figures came out on Wednesday showing that in seasonally adjusted terms the economy grew by 0.6% in December and a very solid 3.0% for the year.

The big bump in annual growth from 2.5% in September was due to the ABS revising up the September quarterly growth figures from 0.9% to 1.1%. But even the trend figures showed growth of 0.7% in December and 2.8% for the year:

The trend figures actually show some pretty nice numbers across the board. Per capita GDP is going well, and even nominal GDP, while still well down on what we would usually expect is doing OK at 2.5% annual growth:

So where did this growth come from? Thank the households (and the houses). The biggest contributor to growth in both the December quarter and in all of 2015 in seasonally adjusted terms was household spending:

Of the 0.6% GDP growth in December, household spending accounted for more than three-quarters with 0.4% points. The spending by householders more than made up for the drop in investment in the mining sector and other industries.

The housing boom has also been helping to keep the economy ticking over. In 2015, private dwelling construction contributed 0.49% points to GDP growth. What is clear however is that the growth in the building of houses and apartments is not enough to counter the fall in construction elsewhere, as non-dwelling construction reduced GDP growth in 2015 by 1.1% points in seasonally adjusted terms and 0.9% points in trend terms:

So what were we spending all that money on that was helping growth the economy so much? Well you might not believe it, but in the December quarter, the biggest contributor to household spending was recreation and culture. Yes Christmas helps, but the December quarter is not usually the biggest growth quarter for recreation.

Annually, the story is less joyous – rents and insurance accounted for nearly a third of the 2.9% increase in household consumption:

One area we continue to spend less money on is cigarettes and tobacco. In trend terms, the consumption of the nicotine sticks fell 2.5% in December and 11.4% in all of 2105.

Exports are still doing well though. As I noted when the last GDP figures came out, one of the problems with relying on exports to grow your economy is that they are pretty erratic – especially in seasonally adjusted terms. In the December quarter the volume of exports grew by just 0.6%, down from the 5.4% growth in September but well above the fall of 3.9% in June (see what I mean about erratic):

Imports in seasonally adjusted terms grew by 0.6% in December so the growth of net exports (exports minus imports) was effectively zero, and as a result they added nothing to growth.

But when we turn to the trend figures things look rather different. Net exports were actually the biggest contributor to trend growth in the December quarter – adding 0.45% points out of the 0.7% GDP increase.

Given the erratic nature of exports, it is best not to focus on the seasonally adjusted data, but rather go with the more calm trend version. And even better, forget about the quarterly growth and look at annual growth. On this score net exports are still contributing well to annual GDP growth:

Indeed, in 2015, the contribution of net exports completely cancelled out the detraction of growth that came from the collapse in investment:



Is mining still king? Yep, there may be a massive collapse in investment, but the growth in mining exports still sees the mining industry as the biggest contributor to GDP growth:

But the manufacturing industry? Oh dear. It continued its long run of detracting from GDP growth. In terms of industry growth itself (as opposed to contribution to GDP), the big winner was real estate services – we’re clearly still buying houses (and paying rents):

Demand is still weak – especially out west. Strong household consumption and private dwelling consumption combined to keep total demand (the combination of consumption and investment) growth positive in the December quarter. Also of assistance – at least in seasonally adjusted terms – was a big growth in public investment, both defence and non-defence.

But in trend terms government investment wasn’t a factor at all. And if we look at the annual growth of both private and public investment we see that public investment is doing little to bring up the slack from the end of the mining boom:

There are signs the infrastructure spending is picking up, but it is still a little way from really assisting economic growth.

The collapse of investment in the mining sector also continues to see demand in Western Australia absolutely plummet. In trend terms, final demand in Western Australia has now been falling for more than two years and is back at the level it was in September 2011:

And you really see the change in the structure of our economy when you look at the contribution of NSW and Victoria’s demand to GDP growth compared to that of WA and Queensland:

The two eastern states are powering the way, with the mining states dragging us down (but of course, you don’t count exports).

So things are looking quite good, all things considered. We’re spending nicely, our investment in the housing sector continues to do well, and most industries are growing. But the falling value of our exports and very weak wages growth has not seen this economic growth translate into income.

In December the value of real net national disposable income (the ABS’s broad measure of national economic well-being) fell 0.3% and in 2015 it fell 1.2%:

But for now at least talk of a recession is left behind. So far our household spending and our building of apartments and houses has helped alleviate the shift from the mining boom – exactly as the RBA hoped it would when it cut rates to these current record lows.

And the export phase of the mining boom continues its erratic yet substantial contribution to our economy. It’s just that unlike its predecessor the investment boom it isn’t doing much to contribute to our overall economic well being.