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Australia continues to grow but the signs are not all good

Well its officially Spring in Australia and today in Newcastle it is a very warm 23 degrees (warm for this time of year) and it looks like being a long hot (beautiful) summer. The statistics world is looking very bright today as well with the release by the Australian Bureau Statistics of the National Accounts data for the June quarter. The media are today beating up a story about the Goldilocks economy which on first glimpse is a reasonable conclusion. But given that growth has been driven by rising personal consumption and falling saving when household debt remains at dangerous levels, and export growth which is mostly due to terms of trade effects which will not last for much longer and government fiscal stimulus spending which is now being withdrawn something has to happen to private investment soon for the growth to endure. Further, if you take the government contribution out over the last year then things look very sick indeed. The fiscal intervention definitely kept the Australian economy afloat over the last year although that impact is now waning significantly.

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Australia GDP growth flat-lining

The Australian Bureau of Statistics released the March 2010 National Accounts data today and it revealed that the Australian economy has grown by 0.5 per cent only in the first quarter of 2010 and the trend is now dead flat. While the Australian economy sidestepped the global economic crisis with just one negative quarter of real GDP growth courtesy of the aggressive fiscal stimulus packages, private sector spending continues to subtract from growth. Private capital formation declined in the March quarter. The current performance of the Australian economy will make any not be sufficient inroads into the high rates of labour underutilisation that remain. The RBA claimed yesterday that economic growth is back around trend but the data shows that is far from the truth. Today’s data confirms that the fiscal contribution was the only reason Australia stayed out of official recession.

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GDP growth but black clouds on the horizon

Today the Australian Bureau of Statistics released the December quarter National Accounts data which gives us the rear-vision mirror view of how the economy has been travelling at a distance of 3-months. The data confirms that the Australian economy sidestepped the global economic crisis with just one negative quarter of real GDP growth and is moving towards trend growth. However, restoring trend growth is nothing to be proud of. The fact remains that the current performance of the Australian economy will not be sufficient to achieve and sustain full employment. The RBA claim yesterday that getting back on trend growth is a justification for tightening monetary policy just reinforces the neo-liberal policy dominance – that some underutilised labour is required to fight inflation. While the RBA monetary policy tightening will not help growth, the real threat to our prosperity will come in the May budget when the federal government will announce its fiscal austerity plans. Combined with the deflationary impacts of similar moves by other governments and the impending meltdown of the EMU region, the GDP growth we are enjoying today may not persist. And all this will be driven by the mindless ideology of the deficit-terrorists.

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