skip to Main Content

Australian National Accounts – the fragility of growth increases

The – March-quarter 2015 National Accounts data – released by the Australian Bureau of Statistics today confirms that the Australian economy was stuck in a weak growth state in the last three months of 2014. Real GDP growth grew by by a 0.9 per cent in the March-quarter 2015. The annual growth rate of 2.3 per cent down from 2.5 per cent in the December-quarter, and still well below trend. But the March-quarter result is stronger than the last 3 quarters. One should not be optimistic about the future though. Australia is now firmly caught up in what we call an ‘income recession’ where the total market value of goods and services (GDP) is outpacing the flow that Australian residents enjoy as income. Real net national disposable income fell by 0.2 per cent over the last year. While private consumption growth remained positive, it is not being driven by wages growth (which have fallen overall in the last year). Rather, the savings ratio fell and indebtedness in on the increase – signs of trends that ultimately led to the GFC> Further, despite corporate profits rising, private investment growth was negative. With the fiscal position now leaning towards austerity, today’s data paints a fairly uncertain picture for the Australian economy for the remainder of this year. Now is not the time for fiscal retrenchment. With real GDP growth well below that needed to reduce unemployment and underemployment, the government needs to stimulate the economy to boost income and employment growth. This would also allow wages to grow and take the squeeze off households.

Read More

Friday lay day – Australia heading for recession

Its the Friday lay day blog, which means very little as it turns out. Today, though it means a short insight into the latest data from the Australian Bureau of Statistics – Private New Capital Expenditure and Expected Expenditure – data for the March-quarter yesterday, which showed that Australia is heading for recession-level private capital formation rates. The data also suggests that the Australian government’s fiscal strategy outlined earlier in May is based on deeply flawed forecasts of private spending and if the investment plans signalled in this data release are realised then the economy will slow substantially over the next 12 months. The fiscal stance in the most recent statement is towards contraction (austerity). In the light of the latest investment expectations revealed in the ABS data release, the Government should abandon their fiscal strategy immediately and announce a significant stimulus package. Unemployment is already rising and will rise further under the current trends. This is another case of neo-liberal austerity white-anting the capacity of the economy to deliver prosperity for all.

Read More

Australian national accounts – growth well below trend continues

The – December-quarter 2014 National Accounts data – released by the Australian Bureau of Statistics today confirms that the Australian economy was stuck in a weak growth state in the last three months of 2014. Real GDP growth grew by by a miserable 0.5 per cent in the December-quarter 2014. The annual growth rate of 2.5 per cent is being held up by the strong March-quarter 2014 result (1.1 per cent growth), which was clearly atypical. An growth rate of around 2 per cent is a more reasonable estimate of where Australia began 2015. With fiscal austerity set to worsen this year, today’s date paints a fairly gloomy picture for the Australian economy for the remainder of this year. Now is not the time for fiscal retrenchment. The government needs to stimulate the economy to boost income and employment growth and not squeeze households and lead them into more debt.

Read More

“There is plenty of stimulus” – but I am struggling to see it

“The economy is not weak enough that there needs to be more fiscal stimulus … there’s plenty of stimulus from the Reserve bank with record low interest rates” (Source). That comment came from an Australian private sector investment bank economist. It is an extraordinary comment to make and still claim status as a professional economist. What is the measure of a weak economy? Rising unemployment and underemployment, now well above 15 per cent? Negative real net national disposable income for two consecutive quarters? Real GDP growth barely a 1/3 of it previous trend rate? Because that is the reality in Australia right now and it is getting worse. Further, the RBA has cut the short-term interest rate 14 times since October 2011 and has held the rate at 2.5 per cent (a record low) since September 2013. The unemployment rate has risen by 1.1 per cent since October 2011 and 0.5 per cent since September 2013. When will these clowns in the financial markets finally realise that monetary policy is an ineffective tool for increasing aggregate demand?

Read More

Australian national accounts – growth plummets as policy fails

In September, I wrote of the 2nd-quarter national accounts data that the economy was weak and getting weaker. The – September-quarter 2014 data released by the Australian Bureau of Statistics today confirms that prognosis. Weak is an understatement. Real GDP growth grew by by a miserable 0.3 per cent a further drop on the 0.5 per cent in the June-quarter 2013. The annualised growth rate of 2.7 per cent is being held up by the strong in late 2013 but something around 1.2 to 1.8 per cent per annum looking forward is a more realistic assessment of where the economy is at present. Despite a substantial fall in the terms of trade, net exports contributed 0.8 percentage points to growth while consumption contributed 0.4 points. A major decline in private and public investment shaved off 0.7 percentage points. Fiscal austerity is set to worsen, which means that the data paints a fairly gloomy picture for the Australian economy for the next year at least.

Read More

Australian national accounts – weak and getting weaker

When the first-quarter National Accounts data came out for Australia I noted that despite the relatively strong growth recorded in that period, the Australian economy was in a fragile state and the contemporary indicators (given that the real GDP data is 3 months old by the time it is published) were indicating that the economy would slow significantly in the June-quarter. Today’s Australian Bureau of Statistics – Australian National Accounts – for the June-quarter 2014, confirms that prediction. Real GDP growth grew by 0.5 per cent down from 1.1 per cent in the June-quarter 2013. The annualised growth rate of 3.1 per cent is being held up by the strong June-quarter growth but something around 2 per cent per annum looking forward is a more realistic assessment of where the economy is at present. The external sector is now a negative influence on growth as is the government sector. In this quarter, there was a large inventory adjustment (up) which was the difference between positive and negative growth overall. That short of inventory swing will not continue. With export prices plummetting due to a glut in iron ore shipments to China, the external sector will continue to be a drag. Fiscal austerity is set to worse, which means that the data paints a fairly gloomy picture for the Australian economy for the rest of this year at least.

Read More

Australian national accounts – a fragile state

Yesterday’s Australian Bureau of Statistics – Australian National Accounts – for the March-quarter 2014, shows that real GDP growth was 1.1 per cent, up from 0.8 per cent in the December-quarter 2013. The annualised growth rate of 3.2 per cent is an improvement on the 2.8 per cent from last quarter and is close to the trend rate between 2000 and 2008 of 3.3 per cent. Growth is being driven almost exclusively by Net exports with some help from household consumption and private investment, although the last two components are fairly subdued. The question is whether the boom in net exports in the Mining secotr in the March-quarter 2014 can be maintained. The signs are that it will taper somewhat in the second-quarter results given that the terms of trade are falling significantly and the export volumes that have been driven by strong growth in China are likely to decline as the Chinese economy slows. Overall, the data paints a fairly fragile picture for the Australian economy with not much sign of activity in the non-Mining sectors.

Read More

Australian National Accounts – below trend growth continues

Today’s Australian Bureau of Statistics – Australian National Accounts – for the December-quarter 2013, shows that real GDP growth was 0.8 per cent, up from 0.6 per cent in the September-quarter 2013. The annualised growth rate of 2.8 per cent is an improvement on the 2.3 per cent from last quarter but still remains well below the trend rate between 2000 and 2008 of 3.3 per cent. Growth is being driven by household consumption, net exports, and public consumption and investment. Without the contribution of the government sector, overall growth would have been negative over the last two quarters. This contribution, while welcome, will not be sustained given the current political environment. Overall, the data paints a fairly subdued picture for the Australian economy for the last three months of 2013.

Read More

Australian national accounts – stagnation sets in

Today’s Australian Bureau of Statistics – Australian National Accounts – for the September-quarter 2013, shows that real GDP growth was 0.6 per cent, down from the (revised) 0.7 per cent for the June-quarter. The annualised growth rate of 2.3 per cent is now well below the trend rate between 2000 and 2008 of 3.3 per cent. This poor growth relative to trend is the reason the unemployment rate is rising. The stunning result is that the public sector contributed 1.5 percentage points to growth this quarter (a reversal from the June-quarter). This contribution, while welcome, will not be sustained given the current political environment. Overall, the data paints a fairly gloomy overall picture for the Australian economy. It ia hard to discern what the new Federal government is up to given that in 2 months we have already had four discrete statements about education policy, for example! But if their overall macroeconomic rhetoric is maintained and they start hacking into public spending to flex their conservative muscles then the outlook will shift very quickly from gloomy to disastrous and we will follow Europe down the sink hole.

Read More

Australian National Accounts – gloomy but not yet disastrous

Today’s Australian Bureau of Statistics – Australian National Accounts – for the June-quarter 2013, shows that real GDP growth was 0.6 per cent, up slightly from the revised 0.5 per cent for the March-quarter 2013 (previously published at 0.6 per cent). The annualised growth rate of 2.6 per cent is now well below the trend rate between 2000 and 2008 and there is now a 4.3 per cent gap between actual growth and trend. This will widen in coming quarters and it is the reason the unemployment rate is rising. Overall, the data paints a fairly gloomy overall picture for the Australian economy. Gloomy without being disastrous. However, if the new federal government (after Saturday) start hacking into public spending to flex their conservative muscles then the outlook will shift very quickly from gloomy to disastrous and we will follow Europe down the sink hole.

Read More
Back To Top