Thursday, June 7, 2012
These figures strain credulity. If they are right, then the economy has far more strength than we suspected. If they are wrong, they will be revised down, or followed by a fall.
These are just first estimates. The bigger the first one, the more likely it is to be revised. For June 2010, the first growth estimate was 1.2 per cent; that now reads as 0.6 per cent. Just a year ago, GDP was estimated to have fallen 1.2 per cent in the March quarter: that fall is now just 0.5 per cent.
Suppose the figures are right: what do they tell us that we didn't know? Quite a lot.
They show an economy firing on two engines: mining investment and consumer spending. We knew about the first, and is it firing! Engineering construction, 5 per cent of the economy, now generates half its growth.
In Western Australia, demand (total spending) jumped 14 per cent in the past year. On these figures, WA is growing faster than China. The surprise is the second engine. On these figures, far from being cautious consumers, we have been on a binge.
Consumer spending shot up by 1.6 per cent in the March quarter. We bought 3.7 per cent more food, 5.5 per cent more flights and transport services, as well as big rises in health services, spending in pubs and restaurants, entertainment, clothing, and so on.
But a close look shows something strange. In fact, growth in spending has not risen. In the past six months, it has been the slowest since 2010. What's new is that inflation has disappeared.
In those six months, the bureau says, consumer prices grew just 0.1 per cent. So virtually all our spending growth must have been used to buy more of everything. Really? Yes, we bought more bananas, but all the other stuff?
A second surprise: productivity shot up. With all the job cuts, hours worked fell 0.6 per cent. But output grew 1.4 per cent, so that means we produced 2 per cent more for every hour worked. The bureau estimates productivity shot up 4 per cent in the year, and 5.3 per cent in the market sector. That's hard to swallow.
Third surprise: the bureau says all sorts of industries are enjoying unexpected booms.
Government spending grew a modest 1.2 per cent over the year, yet the output of public administration shot up 5 per cent. You wonder how they work that out.
Mining had the fastest growth (11.3 per cent) and agriculture (10.6) was close behind. Finance recorded 5.4 per cent growth, despite job cuts and little credit growth. The professions, transport and wholesale trade all grew more than 5 per cent. Even on these figures, Australia is still a two-speed economy. Over the year, demand grew 10 per cent in the mining states, and 2 per cent in the south-east, where 70 per cent of Australians live.
The figures suggest Victoria was in recession in the second half of 2011, but leapt out of it in the March quarter, thanks to us consumers. Uh-huh.
Wayne Swan wants us to take pride in these figures. I would if I could believe them.
WHERE THE GROWTH IS:
Growth in demand, year to March
WA 5.8 13.6
Queensland 5.2 7.8
NT 0.7 15.1
Total 11.8 10.2
NSW 2.1 2.1
Victoria 1.5 1.9
ACT 0.4 3.2
SA 0.2 0.7
Tasmania - 0.02 - 0.2
Total 4.2 1.9
key sectors of growth
Consumer spending 7.8 4.2
Engineering construction 7.7 53.0
Exports 3.9 6.3
Machinery & equipment 1.5 7.5
Fed govt investment 1.1 21.2
Business building 0.8 11.8
and those pulling us back
Imports - 8.3 - 11.5
State govt investment - 2.3 -15.3
Housing construction - 1.1 - 6.2
BY INDUSTRY $m %
Mining 2.7 11.3
Finance 1.7 5.4
Professions 1.1 5.3
Health 1.1 5.5
Construction 0.9 3.5
Transport 0.9 5.1
Government 0.8 5.0
Agriculture 0.8 10.6
Wholesale trade 0.8 5.5
Manufacturing 0.2 0.6
Electricity - 0.1 - 3.0
IT/communications - 0.1 - 1.2
Source: Australian Business of Statistics