As Summer struggles to makes it appearance on the East Coast (coldest start for something like 40 odd years) the ABS released the Australian National Accounts – for the September 2011 quarter came out today and showed that the Australian economy grew by 1 per cent in the quarter down from the strong 1.2 per cent in June. In real terms, the economy grew 2.5 per cent over the last 12 months which is a good result considering that the March quarter contraction of 0.9 per cent. There are several competing forces contributing to this result. The growth is being driven by private capital formation and household consumption but being dragged down by net exports, harsh government austerity and the run down in inventories, the latter suggesting firms are losing confidence in the immediate outlook. If the private investment boom continues then growth for the foreseeable future should be maintained and approach trend. I would note that the recent (pre-crisis) trend growth was insufficient to mop up both the residual unemployment and the rising underemployment. The case for continued government support for higher growth remains especially with inflation now falling.