Profit rebound points to improved economic growth

Amid fervid expectations an election will be called as soon as this Sunday, new profit data shows economy-wide earnings rose in the December quarter.

Mining profits rose $2.9bn in the December quarter, new Australian Bureau of Statistics figures show. Picture: istock

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The mining industry booked a $2.9bn profit boost on the back of rebounding commodity prices in the December quarter, leading a $7.3bn across-the-board increase in company earnings and fuelling expectations that new GDP data, due on Wednesday, will show the economy is finally starting to turn a corner.

Amid anticipation that an election could be called as soon as this Sunday, the new GDP figures will act as the final economic scorecard for Labor ahead of the impending vote.

Economists expect the data will show the economy expanded by 0.5 per cent in the December quarter, up from 0.3 per cent in September, as resurgent consumer spending and elevated government expenditure helped prop up growth.

That uptick would bring annual economic growth to 1.2 per cent, its strongest reading since December 2023, but still among the weakest results outside the pandemic since the early 1990s.

Veteran budget watcher Chris Richardson said the stronger-than-expected profit outcome for the resources sector combined with elevated population growth was delivering a “double delight” for the Treasury.

“Population growth is slowing, but it’s not slowing as fast as the ­official forecasts have had,” Mr Richardson said. “Combined with more profits from what we sell to the world, that increases the size of the pie that we can tax.”

The profit rebound was reflected in new Finance Department figures, released last week, that showed in the seven months to January 31, the budget bottom line was tracking $3.6bn ahead of forecasts in the mid-year economic and fiscal outlook. The better-than-expected result was overwhelmingly due to a $2.5bn improvement in the company tax take. Personal income and superannuation tax collections were similarly higher than anticipated.

While the mining sector posted the largest profit increase according to Monday’s figures, a host of other industries reported strong profit growth, following a period of stagnant or retreating profits amid weak consumer demand.

Profits in the hospitality sector, for example, climbed 9.7 per cent, while the wholesale trade sector, which largely reflects conditions in the retail sector, surged 19 per cent, the ABS figures showed.

After businesses aggressively ran down their inventories during the September quarter, the data also revealed companies were beginning to restock again in anticipation of a pick-up in consumer demand.

Economists expect the inventory increase will add a hefty 0.3 percentage points to Wednesday’s GDP figures.