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Gross Domestic Product (GDP)

GDP Figures – Don’t be alarmed!

Nathan Lear
Partner/Private Client Adviser
14 Jun 2011

The term GDP (Gross Domestic Product) is a key measure of economic growth. Last week the Australian Bureau of Statistics released what appeared to be a terrible GDP result of minus 1.2% for the first quarter of 2011. It was the first fall in GDP since the September quarter of 2008, the height of the global financial crisis, and it represents the largest quarterly contraction since the recession of the early 1990s.

But while it is a fairly negative result, if we dig a little deeper it is not quite as bad as it seems.

The main reason for the poor result was due to the Queensland floods. This severely impacted the supply side of our economy and affected export volumes, which fell 8.7% during the quarter, the biggest quarterly fall in 37 years. However, at the same time, demand over the same period was up 1.3% and  demand for our raw commodities, led by China, doesn’t appear to be slowing.

So what does this latest GDP figure mean for Australia? Not much really. The supply side of our economy is expected to pick up and export numbers should return to normal, along with the reconstruction of Queensland. This should see GDP figures back into the black next quarter.

Perhaps the most notable impact for Australians is that on interest rates as it will delay a rate rise until later this year.

The bottom line is simply, don’t be alarmed.

Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.