Our great growth run

Today’s GDP data has been rightly described as good, rather than great. While our economy is still performing very well as compared with our biggest allies and trading partner, growth of 0.5% in the March quarter is a great deal slower than the 1.1% growth seen in the December quarter of 2009.

But hey, perhaps we should take a leaf out of the book of CommSec economist Craig James, who rightly points out that the record period of expansion in our Australian economy is now entering its 19th year.

It is a pretty amazing achievement, driven partly by good luck (our abundant natural resources and our proximity to China) and good management (stable governments and our ability to leverage Chinese growth).

While the life of an entrepreneur is always challenging due to short-term economic issues, or specific regulatory matters, or the state of various sectors, we should always remember that Australia remains a pretty good place to do business.

Enough looking back, what does the GDP data tell us about the outlook over the rest of the year?

With today’s data we can see that economic growth is currently running at 2.7%, which is pretty healthy for an economy that remains in recovery mode. Of course, as James points out, our “recovery mode” looks a lot better than that of other countries.

“Without a doubt Australia currently has one of the strongest economies in the advanced world. Housing construction is lifting, the unemployment rate is sliding, confidence levels are consistently high, public debt levels are healthy and economic growth is heading back to trend. While other countries have been attempting to kick-start their economy, Australia has moved into third gear.”

While the strongest contributions to growth came from professional, scientific and technical services sector, the financial and insurance services sector and the transport, postal and warehousing sector, private sector investment still remains a touch weak – which is why the economy is patchy.

This will improve as the year goes on (and the mining sector continues to crank up) but the big question mark remains over interest rates – how will businesses and consumers react if rates keep rising?

History suggests businesses and consumers will adjust to the recent rate increases and once they do growth will really fire up.