The latest national accounts figures for the December quarter, as boring as they may be to some, caused the Treasurer, Scott Morrison to be upbeat about the direction the Australian economy is heading. He is being premature.
Trying to gloss over a disturbing trend by remarking on how much better we are performing above the OECD average is very short sighted.
The December quarter showed that real GDP grew by 0.6 per cent in the three months to December 2015 (down from 1.1 per cent in the September-quarter), driven largely by private consumption.
Two points worthy of note here. Firstly, the December quarter includes Christmas spending which has a one-off impact and does not suggest a continuing trend. Secondly, it is being funded by a declining saving ratio and rising private indebtedness. This we know because of declining real wages growth and declining real net national disposable income overall.
Rising private debt is simply not sustainable.
The government sector was responsible for 50 per cent of the total growth in the December-quarter. Allowing for a likely fall in domestic spending in the March 2016 quarter and an overall lack of interest coming from the corporate sector, government spending will be the main driver of the economy in the short term.
However, government spending is barely keeping pace with employment growth which means existing unemployment and underemployment will probably rise in the coming months. If the increase in the unemployment level in January is followed by a further increase in February, we can assume a trend is evident as the government looks for ways to curb spending.
This is the opposite of what they should be doing.
For all of Scott Morrison’s upbeat response to the December quarter figures, it suggests he is hiding what should be some concern for what lies ahead. Preparing the May budget is underway and future projections about private sector investment should be critical to the bottom line.
However, given Treasury’s past record of inaccuracies, one can’t have much confidence in the figures they will produce. Economist Bill Mitchell says, “The negative growth in private investment means that potential output in Australia and future growth rates will be lower than otherwise. Again, not a positive sign.”
The temptation to pad the budget figures ahead of a general election, perhaps a double dissolution election in July, will be strong. But if that deceitful option is taken, it will not hide the fact that we are currently in an income recession.
Bill Mitchell warns, “Real net national disposable income fell by a further 0.1 per cent over the quarter and 1.1 per cent over the last year. The data continues to confirm that Australia faces a very uncertain outlook and with the annual fiscal statement coming up – now is not the time to be cutting net public spending.”
If the government plans to go to an election on the strength of a deliberately constructed May fiscal statement (budget), that projects less than honest forward estimates, they will be shooting themselves in the foot.
It may buy them the 2016 election, but the state of the economy will deteriorate progressively over the next two years such that chronic unemployment will be far worse than now and we will see a significant decline in our GDP.
This is the price we will pay for re-electing a government that does not know how to restore a failing economy, whose only interest is in being re-elected and who will stop at nothing to achieve that end.
Is this what we want?
Morrison knows nothing but spin. The problem is, he never has been very good at it.
Morrison’s arrogance is blatant in its deference to the interests of rich people and elitists, and bad luck to the rest.
NO! But the democratically ignorant, apathetic, ignoramises will once more listen to crap and vote against their own interests. Largely because they are easily manipulated by the right wingers who have always known how to do this. australians are particularly fair game because they love negativity and will vote for the most negative. That was how shouldabeenaborted got in and now turncoat is beginning to show his true colours and follow down the same path.
“Is this what we want?” . . . No, but it is probably what we will get.
“Christmas spending is a one off” – the figures here replace the figures from last December quarter, no “one-off” – as for government spending keeping pace with employment changes – this is just plain daft. Keeping government expenditure down and reducing the tax burden would boast the economy.
No, it would not, Andrew. Reduced expenditure will cause higher unemployment in the absence of any corporate turn around. Reducing the tax burden is no guarantee of a demand led revival.
AndrewB I am not sure about “boast” but it certainly won’t boost the economy. Ask any Economist and they will tell you the ONLY source of net financial assets for the private sector is Government spending. Our current Government will never achieve a surplus (thankfully) but by cutting Government spending they will drive us into recession. I refer you to work down by Bill Mitchell, Steven Hail, L Randall Wray, and Warren Mosler, just to name a few. Look then up on YouTube.
Young Scotty is like a kid bringing a new toy into the sandpit – boats was first, phuck the passengers, bracket creep really freaked him out until he found out what it was – GST – negative gearing – (feel free to add others) elevating him to his very own parallel universe being the head honcho with hands on the public (our common wealth) assets supposedly held in trust on behalf of all Australians – humanistically pleading “fellow citizens (the highest power there is) help us”.
Once again caring only about a govt surplus to con the ignorant masses. They will only drive up unemployment if they try.
A sensible govt. would be deficit spending to close the output gap – that is the gap between what we could be producing to what we are actually producing.
Ps Part time jobs will not drive growth.
LNP – eternally clueless about what investment into a nation really means…
Here’s a little historical snapshot for the rusted-on RWNJ’s.
https://pbs.twimg.com/media/Ccl2dkJUAAANH08.jpg:large
My betting is that the Smurk will never deliver a budget.
Breaking news….Michael Lawler (Kathy Jackson’s partner) has resigned.
Fair work commission Vice President. … sif describe him as kathy jacksons partner. resigned from being her partner?
Wow, that’s big news, Kaye. Now he’ll have more time to visit Kathy should she be called away. (I think it’s fair to say she’s facing incarceration).
Fred Martin. You don’t even need to go to the big economists you mention. The three sectors accounting identity was discussed by John Kelly in a previous post. That alone guarantees that the govt. should be deficit spending. Further, with unemployment high and rising, stimulus is what is required. Creating jobs by investing in infrastructure, health and education would be the solution, but these nongs have no clue except (surplus = good, deficit = bad). And even as we speak,
“Real net national disposable income per capita has shown positive growth in only one of the last seven quarters. In other words, Australians are poorer in income terms than they were at the beginning of 2014.” (Bill Mitchell)
So much for “better economic managers”.
Spot on John.
You cannot ‘save’ your way out of a recession, or to avoid a recession. Liberals have already tried this in the past and fell flat on their faces, making the economy worse instead of better.