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Monthly Economic Indicators

Executive Summary

  • Private consumption growth likely moderated in the December 2016 quarter, following strong growth earlier in the year
  • Migration and international visitor arrivals reached new record highs in January 2017
  • Dwelling consents and prices ease
  • Trading partner growth outlook remains positive, although political uncertainty is creating risks

Key economic data released in February point to a moderation in consumption growth in the December 2016 quarter, following strong growth in the previous two quarters. However, electronic card data surged in January, which in combination with rising consumer confidence in February points to a likely rebound in consumption growth in the March quarter 2017. Inbound tourism and migration reached new records in January, with 3.5 million international visitors in the year and 71,300 net migrants.

Dwelling consents and house prices continued to decline in December, at odds with the record net migration inflows which underpin housing demand. The dip in dwelling consents is expected to be temporary as a significant amount of work remains in the pipeline and sentiment in the construction sector continues to buoy the ANZBO business confidence measure, although capacity constraints in the sector remain a risk.

Prices continue to evolve as expected; dairy prices at the GDT auction in February retraced slightly from January’s levels. However, the lift in dairy prices towards the end of 2016 supported higher producer prices in the December 2016 quarter, in addition to higher oil prices. Strong food prices in January indicate some upside to the near-term inflation outlook, depending on the extent of retracement.

The outlook for growth in our major trading partners continued to improve.  In Australia, growth in activity resumed in the December quarter following September’s contraction, although it is expected to be some time before growth is sufficiently strong to generate a marked tightening in the labour market.  In other regions, the faster pace of growth evident at the end of 2016 appears to have been sustained into 2017.  Nonetheless, there are still a significant number of risks evident, with political risk in Europe prominent over the month. There is some evidence that heightened political uncertainty may harm global trade growth.

This month’s special topic focusses on recent trends in tax revenue, where a sharp increase in core Crown tax revenue has been reported for the six months to December 2016. The increase appears to be driven by momentum in the economy, but may also be partly explained by other factors such as timing, base effects, and changes in tax payer behaviour (ie, with tax pooling).

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