The economy is not as bad as Joe Hockey claims: ABS national accounts

As it turns out, the Australian economy wasn’t the basket case Treasurer Joe Hockey, the rest of the government, business groups and their media mates have been claimed it to be after the gloomy mid year economic outlook was released last December. Economic growth picked up in the December quarter, ABS national accounts showed this morning, with growth of 0.8% seasonally adjusted, stronger than it was in the three months to September (0.6%).

In his first few months as treasurer, Hockey first warned us of the dire threat to growth from offshore — back when he announced he was lavishing $9 billion on the Reserve Bank — and then after he took the lowest possible forecasts from Treasury for the Mid Year Economic Forecast in order to portray himself as Hercules cleaning out the Augean stables left to him by Labor.

Today’s numbers, though, suggest Hockey was more Chicken Little than Hercules. Growth through all of 2013 was a much stronger 2.8% compared to the annual rate of just 2.3% in the September quarter. The 2013 growth rate was much closer to the 3.1% growth seen in calendar 2012 and makes a mockery of the gloom and doom that emanated not just from Hockey but even from the unions and Labor, anxious to portray the government as killing the economy through being unwilling to keep handing out money.

But when Hockey held his MYEFO media conference in December 17 last year to detail to contents of what appeared to be a ‘slit your wrists’ assessment from the economy, the real thing was gathering pace – that’s what successive figures for retail sales, exports, the National Australia Bank’s business surveys and quite a few other measures show. Against that there was jobs data was negative and looking like it would worsen in line with forecasts, before it would improve. But the turmoil over the Holden announcement had little impact on consumers: they started using their savings (the household savings ratio fell below 10% for the first time since mid-2010), spent more in shops, on property and overseas travel.

The only gloomy spot, which we knew about from last week’s capital expenditure data, was for private investment: gross capital formation – a measure of investment in the economy – which was a negative 0.5%. But thanks to the weakening dollar, the terms of trade rose 0.6% in the quarter as export volumes rose and import volumes fell — net exports added 0.6%. But final consumption expenditure at 0.5%, much stronger than many business economists had forecast – that’s down to the surge in retail spending in the closing months of 2013 and the real estate boom.

Industries contributing to growth were mining (1.2% because of the rising level of exports), while manufacturing (1.5%), rental, hiring and real estate added a combined 4.2% (not unexpected given the surge in property prices and activity).

GDP per hour worked also lifted yet again, providing yet more evidence of the sustained period of labour productivity growth delivered under the Fair Work Act — up 0.6% in the quarter and 1.7% throughout the year, and slightly higher in the private sector. And unit labour costs fell 0.7% as well. More data that doesn’t fit the narrative.

This article first appeared on Crikey.


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