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Australian national accounts – growth slowdown continues

The Australian Bureau of Statistics released the latest December-quarter 2017 National Accounts data today (December 6, 2017). It showed several things that defy the hype in the media. First, overall real GDP growth was just 0.4 per cent for the quarter – 1.6 percent annualised – miserable. Even the actual annual rate of 2.4 per cent is well below past trends. Private capital formation was negative. Net exports were negative. Growth is being sustained by household consumption on the back of record levels of household debt and government spending (mostly local and state level investment). Without the contribution of government spending, overall growth would have been negative in the December-quarter. And this is a government that is trying to cut its deficit. This ‘rear vision’ account of where the economy was in the last three months of 2017 is thus not very good reading. Real GDP growth has fallen from 0.8 per cent in the June-quarter, to 0.6 per cent in the September-quarter to 0.4 per cent in the December-quarter. That is a trend I suspected would emerge. What is obvious to me is that private investment is flagging after showing some signs of recovery and a stronger fiscal contribution is necessary to ensure that household consumption scales more proportionately with growth in incomes rather than debt. than is evident in the current data. The external sector continues to make a negative contribution to growth with exports falling. There is no big Post Mining Boom-Export Boom happening folks. The one positive was that growth in compensation of employees was above 1 per cent for the quarter and 4.8 per cent for the year. We will see whether that materialises into a trend. As I concluded last quarter, the overall assessment is that growth is positive but slowing. And, it remains unbalanced and uncertain.

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