Sun, Mar 05, 2017 - Page 7 News List

The economy has bounced back, but workers are not seeing the benefits

The boost to Australia’s latest GDP figures has come from commodity prices and is not trickling down into higher wages

By Greg Jericho  /  The Guardian

Illustration: Louise Ting

The latest Australian GDP figures are a prime example of the great divergence of major economic indicators and the reality that most people feel after strong economic growth in the December quarter last year failed to translate into growth for workers’ wages.

Australian Treasurer Scott Morrison would have breathed a small sigh of relief when the figures were released by the Australian Bureau of Statistics on Wednesday. While there was little expectation that the figures would be bad, had the economy gone backward in the quarter Australia would have been in a “technical recession” (that most silly of phrases) given the September quarter last year saw the economy shrink 0.5 percent.

The December quarterly growth of 1.1 percent in seasonally adjusted terms was well above expectations and enabled Morrison to talk of how “Australia is growing faster than every G7 economy.”

And certainly 1.1 percent quarterly growth is very strong, but before we turn up the music and start dancing in wild celebration, we should have a closer look, and a deep breath.

First, a big reason for the strong growth is because the figure is a comparison with the September quarter: December looks good purely because September was so bad.

It is why the trend and seasonally adjusted figures tell rather different stories. In trend terms, the economy grew just 0.3 percent in the December quarter.

In the annual figures — which enable us to do more than just compare one bad quarter with one good one — we see the picture is pretty uninspiring.

In seasonally adjusted terms, the economy grew by 2.4 percent last year, well below the long-term average and in trend terms it grew by just 1.9 percent, which is actually the worst annual growth since during the Global Financial Crisis (GFC).

Thus the story Morrison is able to tell is due quite a bit to the convention that we report the seasonally adjusted figure as the big number rather than the trend figure.

Seasonally adjusted figures can be a bit weird at times and not completely reflective of the true state of the economy.

In the December quarter the big contributions to growth were household consumption, exports and public investment: The public investment was due to spending on the second National Broadcasting Network satellite, as well as defense aircraft procurements.

The growth of exports is not unexpected, but again shows the erratic nature of seasonally adjusted figures, given the past two quarters saw net exports detract from growth: The growth in household spending is a bit odd given that in the December quarter the big driver was on luxury type items, such as household furnishings and recreation and culture.

However, the annual figures are more understandable — rent, insurance and health being the big drivers of household spending. And while consumption remains a key component of our economic growth it remains well down on the levels the occurred prior to the GFC.

A closer look at the national accounts explains why, because the real story of the GDP figures is how nominal growth has taken off and how wages have not.

Nominal GDP grew by 3 percent in the December quarter alone — the strongest increase in one quarter since June 2010.

The annual growth of 6.1 percent in seasonally adjusted terms and 5.2 percent in trend terms is the best for more than five years.

This story has been viewed 3501 times.

Comments will be moderated. Keep comments relevant to the article. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned. Final decision will be at the discretion of the Taipei Times.

TOP top