Showing posts with label Gross Domestic Product. Show all posts
Showing posts with label Gross Domestic Product. Show all posts

Monday, 16 September 2019

Australian Treasurer Josh Frydenberg has toned down hollow bragging lately


Federal Treasurer Josh Frydenberg has toned down his bragging about economic recovery lately, with the Financial Review on 3 September 2019 reporting that:

Treasurer Josh Frydenberg concedes the nation's economic growth for last financial year will be poor but believes activity will pick up in the September quarter because of cuts to income taxes and interest rates.

Fearing a growth number as low as 1.4 per cent for year ending June when GDP figures are released tomorrow, the Treasurer blamed several factors for what will be a sluggish quarter, including the election campaign.

He blames everyone but the federal government of which he is a senior cabinet minister for the following........

On 4 September 2019 the Australian Bureau of Statistics released its 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Jun 2019.

The opening lines of its media release stated: 

The Australian economy grew 0.5 per cent in seasonally adjusted chain volume terms in the June quarter 2019 and 1.4 per cent through the year, according to figures released by the Australian Bureau of Statistics (ABS) today.

Chief Economist for the ABS, Bruce Hockman, said: “The external sector drove GDP growth this quarter, while growth in the domestic economy remains steady”.


The National Accounts release was accompanied by this graph which shows that, despite this June quarter 2019 growth, GDP growth is the lowest it has been in the last eleven June quarters:

And the decline in GDP growth between June 2018 and June 2019 looked like this:


Interactive graph from https://www.michaelwest.com.au

It is hardly a coincidence that GDP growth  has a sharp downward trajectory, given that once Liberal MP for Cook Scott Morrison became prime minister he spent most of his time between August 2018 & May 2019 in continuous election mode whilst presiding over a virtual policy vacuum.

In June quarter 2019 new and used dwelling investment continued to decline, the household saving ratio fell to the lowest its been since 2008, while the small growth in household consumption was the second lowest its been in the last eleven June quarters. 

Although mining activity picked up, mining gross value added as a percentage of  GDP was almost half of what it was in 2014 and mining investment in dollar terms was the lowest it had been since the June 2011 quarter.

If it wasn't for government expenditure between April and June 2019 then GDP growth would be even slimmer. Even then, neither Prime Minister Morrison nor Treasurer can claim expenditure figures as entirely the result of federal spending because it was state and local governments which did most of the heavy lifting. 

Sunday, 8 September 2019

Scott Morrison delivers - but it is not good economic news


This was then Australian Treasurer Scott Morrison in 2016 with blunt warning about a future recession and dip in living standards..... 

The Sydney Morning Herald, 25 August 2016: 

A generation of Australians has never known a recession or high unemployment but unless hard decisions are taken soon, there is a "terrible risk" complacency could end Australia's 25 consecutive years of economic growth, Treasurer Scott Morrison has warned. 


In the first of three "economic headland" speeches the Treasurer will deliver in the coming weeks, designed to set out the budgetary challenges facing the nation - and the government's vision for how to tackle them - Mr Morrison will argue that it should not take an economic crisis to trigger a wake-up call, or restart the economic reform process, so that Australia enjoys a prosperous future. 


In extracts of the speech seen by Fairfax Media, which will be delivered in Sydney on Thursday, Mr Morrison made a simple plea. 


"I do not want my kids to know what a recession is and everything that goes along with that," he will say. 


"I recognise that in the absence of a 'recession we have to have', or the threat of 'becoming a banana republic', achieving necessary change will be more frustrating and more difficult. 


But it is no less necessary, and achieving it this way is far better than the alternative."  


In addition, Mr Morrison will say that on the current settings, a generation of Australians are likely to never pay tax, setting up a new divide - the "taxed and taxed-nots", prompting the Treasurer to ask: "Are we still up to the challenge of doing what we need to do to ensure another 25 years of consecutive economic growth? 

"Do we really appreciate how quickly our economic success can turn, and are we as prepared as we can be to deal with it ... my greatest concern is that we end up answering these questions the hard way." 


This is Australian Prime Minister Scott Morrison in 2019 delivering 
a fall in living standards and what looks like the beginning of that recession.....

The Australian, 4 September 2019:

The Prime Minister said on Tuesday that the GDP figures would show that Australia is still doing better than many other developed economies.....

“Today’s growth figures will show over the year a softness … what we will see is that in a tough climate we are actually battling away quite well.

The Guardian, 4 September 2019:


Today the government has been madly attempting to spin the GDP figures as good. So let’s cut straight to the point – the figures are terrible and are among the worst we have seen this century. 


But what makes it worse is this government would have us believe they saw them coming. 


How bad are things? Today’s figures show the worst annual economic growth for 18 years. GDP per capita is now lower than it was a year ago, productivity is plunging and the economy is pretty much staying above water purely because of government spending and a drop in imports due to weak investment and household spending. 


And yet these are the figures the treasurer, Josh Frydenberg, would have us believe are evidence of the “resilience of the Australian economy” and which the prime minister, Scott Morrison, said would “come as no surprise to me”. 


If this is how bad things get when the government says it is not being surprised, God help us if they ever get a shock. 


 That trend growth figure is the worst since March 2001. 


We have now had four consecutive quarters of trend growth below 0.5% – that hasn’t happened since the 1990s recession nearly 30 years ago. It is also the first time since the GFC that GDP per capita is lower than it was a year ago.... 


It was little wonder, in his press conference announcing the figures, that the treasurer quickly turned to talking about employment growth compared with the rest of the OECD, because there is not much to boast about on the whole economy side of things. 


Current growth has us in the bottom half of the OECD..... 


The figures also showed, despite the treasurer’s protestations, that living standards are continuing to decline. 


The treasurer suggested that “living standards continue to increase with real net national disposable income per capita rising 1% to be 2.7% higher through the year”. 


But that figure includes all income – both profits and wages. As such, when profits grow strongly due to big increases in export prices, then national income rises. But unless that flows through to households via wages growth, it is pretty meaningless to use it when talking about living standards. 


And we know that the big increase in income is coming from profits – primarily from the mining sector – and it is not flowing through to households. 


When we look at household disposable income we see that it fell not just in the June quarter but over the past year – down more than 1%. Household incomes per capita are currently at the same level they were in real terms in 2010. 


Today’s figures released by the ABS show the economy grew by 0.5% in the June quarter in seasonally adjusted terms and 0.4% in trend terms. Through the year the growth was a truly pathetic 1.4% seasonally adjusted and 1.5% in trend terms. 


Households of course know their living standards are falling, because they are showing it in how they spend their money. In the past year household consumption grew just 1.5% – again the worst result since the GFC..... 


But the treasurer, despite his talking up the figures, knows just how bad they actually are. He even noted that while profits in the mining sector rose 10.6% in the June quarter, in the non-mining sector they “actually fell 0.6%”. 


Because profits in the mining sector have grown so strongly and compensation to employees is growing so weakly, the share of national income going to workers has plunged. 


The last time the share of national income going to workers was this low, the Beatles had just toured Australia.....


Read the full article here.


The Sydney Morning Herald, 6 September 2019: 

“The crisis,” the [Reserve Bank] governor announced at a conference in 2017, “is really in real wage growth.”......

Instead of wages rising at more than 3 per cent a year, as they had in the five years to 2013, the average pay rise since has fallen to 2.2 per cent annually. 

After inflation, the average pay rise has been a scant 0.5 per cent.....

...without higher wages to pay for people’s groceries, medical care, homes and holidays, spending is weak and the economy enfeebled. 

Lowe has urged governments, state and federal, to lead the way, breaking their 2.5 per cent annual limits and paying workers more.

Then there is this headline demonstrating the folly of Liberal-National ideology......

Former failed advertising executive and Institute of Public Affairs adherent Scott Morrison clearly missing the point entirely.

Morrison, McCormack, Frydenberg & Co are hugging their projected budget surplus so tightly they are strangling the national economy.