To most readers here, it should come as no surprise that the average Australian did not share in the current economic growth the nation experienced over the year to March 2016.
Real GDP increased by 1.1 per cent in the March quarter after recording a 0.6 per cent increase in the September 2015 quarter. This brings the annual growth rate to 3.1 per cent, a number that won’t stop unemployment from rising.
Malcolm Turnbull and Scott Morrison will be breathing a sigh of relief on the back these numbers but both know their policies have nothing to do with it.
Coming just weeks before a federal election, one would think this can’t hurt the Coalition’s chances, but when the average Australian realises that his/her share of this growth was close to zero, that type of thinking might be premature.
Real net national disposable income, a broader measure of national economic well-being, rose by 0.2 per cent for the quarter but fell by 1.3 per cent for the 12 months to the March-quarter 2016. That means that Australians are worse off (on average) than they were 12 months ago.
This is the income recession that economists are now speaking about. The good quarterly growth result was largely due to an unexpected spike in exports and a drop in imports. The drop in imports results from a drop in local household consumption. That’s where bells should be ringing.
The much touted transitioning of our economy will not be an overnight thing. It will take as much as a generation to replace the mining construction boom. But more importantly, the production and export phase now in play, is hamstrung by a collapse of world prices and a chronic oversupply.
Don’t expect this to improve anytime soon. While we export large quantities of minerals to feed emerging economies, those quantities are not sustainable. That will become evident in the next few quarters.
Western households have reduced their consumption, which means the emerging economies that supply much of that consumption will start cutting back production. That will translate to a lowering of our exports to them.
But the real problem now, is that flat wages are straining households who are using credit to sustain consumption expenditure. That is a highly fragile position to be in. Herein lies the danger. Flat wages and declining household spending will impact on small business. This will mean more closures and fewer start-ups.
The end result will mean higher unemployment. As a nation, we are too reliant on exports when we are quite capable of repairing and growing our domestic economy by creating local infrastructure projects.
With business too timid to invest, it means government needs to step in and show the way. The present government won’t do that beyond token gestures. They will sit on their hands content to wait for business to do the job for them. It’s not ignorance, but a flawed ideology, that holds them back.
A Coalition win on July 2nd will mean more of the same.