GDP GROWTH IN THE BLACK; US DEFENCE CALL

Economic growth keeps head above water

Australia’s economy grew 2.1 per cent in the 12 months to the end of September, with gross domestic product (GDP) picking up by 0.4 per cent in the latest quarterly national accounts. Public investment helped to sustain growth over the quarter, assisted by increased private investment and household spending. Imports outpaced exports, however, as the importation of equipment for data centres helped to lift capital imports. On a population basis, the Australian Bureau of Statistics said quarterly economic growth was effectively zero, with GDP per capita rising by 0.4 per cent over the 12-month period.

US security strategy demands lift in allies’ defence spending

US President Donald Trump has stepped up pressure on America’s allied nations to spend more, and do more, to bolster collective defence actions. In the National Security Strategy, the White House said the US would harden and strengthen its military presence in the Western Pacific, while maintaining its “determined rhetoric” for Taiwan and Australia to increase defence spending. The strategy calls on US allies and partners to allow the US greater military access to their ports and facilities, spend more on their defence, and invest in capabilities aimed at deterring aggression. It warned of the security challenge posed by the potential for any competitor to control the South China Sea, which it described as one of the world’s most vital lanes of commerce. Control or closure of the South China Sea route would be harmful to the US economy and to broader US interests, the strategy paper said.

Budget surplus hopes dip as debt levels rise

The combined national net debt of Federal, state and territory governments is forecast to rise sharply over the next three years to $1.257 trillion, or almost 38 per cent of GDP, a major parliamentary report has warned. The Parliamentary Budget Office National Fiscal Outlook reported that across Federal and state and territory jurisdictions, all main budget aggregates had worsened as a share of GDP over the last year. The independent report said higher net capital investment was contributing to the rising national net debt level, which it estimated currently at $1 trillion, or 34.8 per cent. Public debt interest payments were forecast by the PBO to increase, reflecting higher debt levels, tight monetary policy settings and global market conditions.

Inflation trends surprise Treasury Head

Federal Treasury Head Jenny Wilkinson has admitted that the annual level of inflation in Australia (3.8 per cent for the Consumer Price Index in October) had been higher than expected, attributing recent rises to a range of temporary factors. Presenting to the Senate Economics Legislation Committee, Ms Wilkinson said the cessation of state energy rebate schemes and large annual price increases in council property rates and childcare made it difficult to read underlying inflation trends. The Treasury Secretary said there was persistent inflation for some household services, including rents, travel services, takeaway food and restaurants, although there was disinflation in insurance premia over the past year. She advised caution in putting too much emphasis on the new-format month-to-month movements in the CPI over the period ahead.

Hurry up on replacement generation, says energy market operator

Australia’s central energy market operator has again warned of the need to escalate replacement energy sources as coal-based power generation is phased out. The Australian Energy Market Operator said 10 coal-fired power stations had closed since 2012, with half of the remaining fleet projected to retire in the coming 10 years, as well as several large gas generators. According to AEMO’s 2025 Transition Plan for System Security, new investments and reforms were needed to maintain system security in advance of the generation exits. AEMO said many assets capable of providing system security services were progressing but had long lead times (five or more years) for approvals, procurement and installation. In its report, AEMO noted that renewables supplied more than 40 per cent of total annual electricity demand in the national electricity market, with 30-minute peaks approaching 80 per cent. In South Australia, renewables regularly peaked at more than 100 per cent of demand, it said.