The Australian economy grew 0.8 per cent in the March quarter and 3.3 over the past year, according to official GDP figures from the ABS.

Economists had typically been expecting quarterly growth of 0.5 per cent and 2.9 per cent over the year to March 31.

The biggest contributors to the better-than-expected result were:

• a rise in inventories as businesses restocked following supply chain disruptions (+1 percentage point)
• household consumption (+0.8 of a percentage point)
• government spending (+0.6 of a percentage point).

However, the ABS figures note a fall in household savings and a rise in incomes both contributed to the increase in spending, which was mainly directed to transport services (+60 per cent), recreation and culture (+4.8 per cent), and hotels, cafes and restaurants (+5.3 per cent) as COVID-19 restrictions eased.

The biggest drag on the economy was a surge in imports — which subtracted 1.7 percentage points from GDP — as some COVID-related supply bottlenecks eased and businesses restocked.

The ABS noted that the first three months of this year saw the biggest jump in imports since the December quarter of 2009.

Wages growth trails surge in profits

The ABS reported a 1.8 per cent increase in the compensation of employees during the quarter, even though hours worked fell 0.9 per cent due mainly to Omicron-related absences.

However, the rise in pay was matched by a 1.9 per cent rise in employed persons, meaning that increased pay was spread across more workers.

The ABS also recorded a jump in labour productivity of 1.7 per cent over the quarter, as workers maintained output despite staff absences, leading to a strong productivity gain of 2.8 per cent over the past year.

This resulted in a 2.7 per cent annual fall in so-called real unit labour costs, a measure of the cost of wages as a share of output produced.

It comes as no surprise then that the so-called gross operating surplus (essentially profits) of non-financial businesses jumped 7.3 per cent in the quarter, led by mining (due to big commodity price increases for LNG, coal and iron ore) and wholesale trade (on improved profit margins for grains, petroleum and cars).

However, the ABS noted a fall in profits for manufacturers, largely driven by a rise in input costs, as well as falls for construction, hospitality and other services as government subsidies wound down.

Over the past year, compensation of employees has risen 5.5 per cent, with much of the increase reflecting a greater number of people in employment, rather than wage increases.

Over the same period, the gross operating surplus of non-financial businesses has surged 21.6 per cent.