A Commonwealth statistician once admitted to me that “economies don’t swing, statisticians do”.
It was a warning to not place too much emphasis on any one data point, but to try to ascertain trends over time.
This week saw the release of the economic growth numbers for the June quarter of this year, and for the financial year 2016-17. GDP grew by 0.8 percent in the June quarter, and by 1.8 percent over the financial year.
While this was a “much of a muchness” result, some have seized on it as evidence that our economy is strengthening, and claim that it is likely to continue to do so.
Sure, 0.8 percent in June was much better than the 0.3 percent achieved in March, but less than the 1.1 percent achieved in December which, in turn was much better than the minus 0.4 percent achieved last September. The average of the four quarters in this financial year was only a little more than half that achieved in the previous financial year. So, not much of a trend improvement!
These are aggregate numbers. It is important to see where the stronger growth came from. It is most instructive that government spending fully accounted for the 0.8 percent growth; while general government spending contributed 0.2 percent of the growth, government capital expenditure accounted for 0.6 percent. Public investment increased by 11.9 percent, driven by state and local government (25.5 percent).
This raises questions about just how serious governments are about budget repair. Not only is government spending sustaining growth, but there is no comfort in the data that the government will achieve the assumed surplus in 2020.
While economists have been looking for evidence of a significant transition from the mining boom to a focus on other sectors, we are yet to see a significant pick up in non-mining investment. Indeed, private investment decreased in the June quarter with a fall of 7.7 percent in non-dwelling construction, swamping a 2.9 percent increase in investment in machinery and equipment.
Overall, exports were stronger than expected. Again, there was disturbing evidence that consumer spending was funded by people running down their savings to meet their rising costs of living, as wages remained flat.
One of the conundrums of recent economic data is that business reports very favourable business conditions, but business and consumer confidence has remained weak. This probably reflects the highest profit share in some 50 years, with historically low wages and interest rates, but with concern that wages may stay flat, while interest rates may increase.
While we heard the mantra of “Jobs and Growth” repeated ad nauseam by the Turnbull Government throughout the last election campaign, we are yet to see genuinely strong and sustainable growth.
While the unemployment numbers have seemed okay, the shift from full-time to part-time work, and the rapid increase in “underemployment” – that is, people not being able to work as many hours as they would like – are of most concern.
The problem is that our politicians are not governing. They seem obsessed in playing with distractions, such as same-sex marriage, dual citizenship, the republic, or whatever, rather than addressing significant issues, such as the cost of living, tax reform, industrial relations reform, training, climate, the NBN, innovation, and many more.
We may be getting improved national security, but certainly not economic security.