Business investment rose by 2.3% during the second quarter, compared with 8.8% during the first quarter (real terms, seasonally adjusted). Growth was spread evenly over non-dwelling construction (up by 2.4%) and spending on equipment (2.3%). During 1995/96 business investment rose by 8.4%, with non-dwelling construction expanding by 20.8% and spending on equipment by 5.8%.
Spending on dwellings rose by 0.6% (real terms, seasonally adjusted) in the second quarter. The increase was the first recorded by this subcomponent since September 1994. There are weak signals that the slump in spending sparked by oversupply and rising interest rates during the second half of 1994 may at last be working its way out of the system. Public investment, however, fell by 5.6% during the second quarter (real terms, seasonally adjusted), partly reversing the 12.7% increase recorded during the previous quarter.
--and consumption spending weakens despite higher incomes--
Private consumption spending rose by 0.5% (real terms, seasonally adjusted) in the second quarter, compared with a rise of 1.3% during the first quarter. This weakening was not caused by slower income growth: household income rose by 1.8% during the second quarter (nominal terms, seasonally adjusted). Wages and salaries, the largest component of household income (at around 62% of the total), rose by 1.3%. Social security payments, which amount to almost 18% of household income, surged by 5% during the quarter. Strong growth was also recorded for income from businesses, rent and investments (up by 2.8%). Household disposable income rose by just under 2%. Household income rose by 7.7% during 1995/96 and household disposable income by 7.1% (nominal terms).
--as household savings rise
The household savings ratio rose to 3.3% (seasonally adjusted) during the second quarter. The figure for the first quarter was also revised from 0.1% to a still low 2.2%. The need for revision arose because some personal income tax paid in December 1995 was not recorded until the first quarter of 1996. This error produced an apparent surge in personal income tax payments and pulled down the savings ratio. The household savings ratio rose marginally to 2.5% for 1995/96 as a whole.
New motor vehicle registrations have fluctuated markedly over recent months, falling by 6.2% in May, rising by 18.5% in June and then falling by 17.7% in July (seasonally adjusted). The large rise in registrations during June reflects the high level of discounting which occurred at this time (even allowing for seasonal factors). Weak sales during the course of the year, together with the firming of the Australian dollar during the last few months of 1995/96, led to larger than normal end of fiscal year discounts. Retail sales (seasonally adjusted) expanded by less than 1% during May and June combined, but then surged by 2.4% during July. Over half of the growth was accounted for by a surge in department store sales, and is more likely to reflect unusually deep discounting at the winter sales than renewed consumer confidence. Department stores are believed to have cut prices sharply in order to run down their high inventory levels. Consumer confidence remained flat during the second quarter and fell by 4% during July (as measured by the Westpac- Melbourne Institute index of consumer confidence).
Government consumption spending fell by 1.1%, wiping out much of the growth of the previous two quarters. Large quarterly swings in government spending are the norm. The growth in private consumption spending for 1995/96 as a whole amounted to a robust 4.3%, and that in government consumption to 2.5%.