tag:theconversation.com,2011:/us/topics/national-accounts-20035/articlesnational accounts – The Conversation2023-12-06T05:37:11Ztag:theconversation.com,2011:article/2189242023-12-06T05:37:11Z2023-12-06T05:37:11ZThe 7 charts that show Australians struggling as saving falls to near zero<figure><img src="https://images.theconversation.com/files/563845/original/file-20231206-16-sl5twe.png?ixlib=rb-1.1.0&rect=239%2C297%2C1533%2C651&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>The national accounts released by the Australian Bureau of Statistics show economic growth slid to a measly <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release">0.2%</a> in the last quarter. </p>
<p>That’s well down from a low 0.4% in the June quarter. </p>
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<p>Of course, economic growth is not everything. The national accounts don’t measure, for example, unpaid work at home or caring work, volunteering work, or the state of Australia’s environment. </p>
<p>That said, other things being equal, it is better to have economic growth than a recession. Economic growth creates jobs and opportunities. </p>
<p>The miserably low rate of economic growth unveiled on Wednesday is cause for concern. </p>
<h2>GDP per head is shrinking</h2>
<p>Among the many reasons for the collapse, the most obvious is high interest rates. </p>
<p>Treasurer Jim Chalmers said the slump was an “<a href="https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/transcripts/press-conference-canberra-3">inevitable consequence</a>” of higher interest rates and international uncertainty.</p>
<p>For individual Australians, it was even worse – growth per head went backward, in what some economists call a “per capita recession”. </p>
<p>GDP per capita fell 0.5% in the quarter to be down 0.3% over the year. </p>
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<p>Disposable income per head fell for the second consecutive quarter.</p>
<p>In the September quarter it slid 1.4% after sliding 1.7% in the June quarter.</p>
<p>Disposable income is buying power adjusted for inflation, after tax. For households coming off fixed mortgages, the collapse is much greater.</p>
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<p>The slide in ready income has forced households in aggregate to as good as stop saving in order to make ends meet. </p>
<p>The household saving ratio has dropped from a peak of 20.4% of income during the COVID lockdowns to just 1.1% – the least in 16 years.</p>
<p>The ultra-low aggregate rate means that while some households are saving, many are using up what they had previously put away.</p>
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<p>The real value of household spending grew not at all in the September quarter and climbed only 0.4% over a year in which Australia’s population grew by more than 2.4%.</p>
<p>The Bureau of Statistics said some of the restraint in recorded household spending was a statistical anomaly, caused by the treatment of government measures including electricity rebates and expansion of the childcare subsidies, which saw increased government spending on behalf of households.</p>
<p>The one bright spot identified by the bureau was “large-scale events including the 2023 FIFA Women’s World Cup” (go Matildas!). This helped push up spending on hotels, cafes and restaurants 0.9% and transport 3.9%.</p>
<h2>Productivity turning back up</h2>
<p>One positive from the depressing national accounts is that they will cause the Reserve Bank to think harder about whether further interest rate rises are needed. </p>
<p>Chalmers said the figures showed consumption was flat <a href="https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/transcripts/press-conference-canberra-3">before</a> the bank’s November rate rise, and it was open to the bank to explain “what if anything today’s outcome means for their own forecasts”.</p>
<p>Another bright spot is productivity. After falling for five consecutive quarters, GDP per hour worked climbed 0.9% in the September quarter, allowing the bank to feel more relaxed about wage rises above its inflation target.</p>
<p>The drivers of productivity are complex, with skills and training, management quality, investment, competition and innovation all part of the picture. The Australian treasury published a <a href="https://treasury.gov.au/sites/default/files/2022-10/p2022-325290-overview.pdf">good overview</a> of what is involved late last year.</p>
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<p>In bad news for incomes, Australia’s terms of trade fell 2.6%.</p>
<p>The terms of trade measure the price we get for exports compared to the price we pay for imports. They are down 9% from their peak last year.</p>
<p>Export prices fell by 1.4% in the quarter due to lower prices for coal and gas exports. Import prices climbed 1.2%.</p>
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<p>The changed trading environment helped push Australia’s current account back into deficit after five years in which it has been mostly in surplus.</p>
<p>The current account records the value of the flow of goods, services and income between Australian residents and the rest of the world. In the September quarter we sent more money out of Australia than came in.</p>
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<p>The current account is volatile. While we have grown used to surpluses, we cannot expect the odds to be <a href="https://thehungergames.fandom.com/f/p/4400000000000007091">ever in our favour</a>. </p>
<p>A more dynamic economy would help. That would mean more creation (and destruction) of companies. More investment in skills and training would help this along. </p>
<p>Greater dynamism is a challenge for everyone – one we have to meet to improve our chances of better news in future national accounts.</p><img src="https://counter.theconversation.com/content/218924/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Bartos does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Australia’s household saving ratio has collapsed from a high of 20% at the start of the decade to just 1.1%.Stephen Bartos, Professor of Economics, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2126422023-09-06T06:15:02Z2023-09-06T06:15:02ZPer capita recession as Chalmers says GDP ‘steady in the face of pressure’<p>Australia’s economy grew a mere <a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/jun-2023">0.4%</a> in the June quarter according to figures released by the Bureau of Statistics on Wednesday, a performance Treasurer Jim Chalmers describes as “steady in the face of unrelenting pressure”.</p>
<p>The lacklustre growth follows growth of 0.4% the previous quarter, and is a step down from the growth of 0.7% in the quarters that preceded it, presenting a stark reminder of the economic challenges caused by rising interest rates as the Reserve Bank attempts to reign in inflation.</p>
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<p>If growth continued at that pace for another two quarters, the annual growth rate would barely reach 1.6%, an alarmingly low figure that. For many Australians it probably feels like a recession, because all of the growth was accounted for by population growth, meaning gross domestic product (GDP) per person fell by 0.3% in both March and the June quarters, in a so-called “<a href="https://www.amp.com.au/content/dam/amp-au/documents/insights/recession-risk-oi-16-2023v2.pdf">per capita recession</a>”.</p>
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<p>The driving force behind this tepid growth is primarily weak household consumption which grew by only 0.1% in the quarter – far less than Australia’s population. </p>
<p>Households, grappling with the increased cost of essential expenses such as fuel and rent, have resorted to cutting down on savings. </p>
<p>In the three months to June Australia’s household saving ratio plummeted to 3.2%, its lowest rate in 15 years.</p>
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<p>How is it possible to have both weak spending and weak saving at the same time? </p>
<p>The answer is that disposable (post tax) income fell by even more. </p>
<p>Real per capita disposable income fell by 2.1% in the June quarter. </p>
<p>Outside of pandemic lockdown years of 2020 and 2021, this was the biggest fall in disposable income per Australian since the 2009 global financial crisis.</p>
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<p>The Bureau of Statistics says mortgage interest expenses have almost doubled over the past year as home building (“dwelling investment”) has slid by 0.2% in the quarter and 1.1% over the year. </p>
<p>In better news, business investment has shown resilience, climbing 0.6% in the quarter, and 3.4% over the year driven, driven in part by a <a href="https://www.afr.com/policy/economy/investment-jumps-as-tradies-rush-on-ute-tax-break-20230831-p5e0z1">rush of tradies</a> attempting to upgrade their cars before a cut in the instant asset write-off limit came into effect on July 1.</p>
<p>Exports climbed 4.3% in the quarter, driven by “education exports” as international students returned.</p>
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Read more:
<a href="https://theconversation.com/you-dont-have-to-be-an-economist-to-know-australia-is-in-a-cost-of-living-crisis-what-are-the-signs-and-what-needs-to-change-210373">You don't have to be an economist to know Australia is in a cost of living crisis. What are the signs and what needs to change?</a>
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<p>Gross operating surpluses, a measure of company profits, fell by 8.6% in the quarter driven by a fall in commodity prices which drove down mining profits.</p>
<p>Pressing on profits were higher wage bills – which surged 9.9% outside of mining, reflecting both wage growth and employment growth, outstripping the 5.1% uptick in non-mining profits.</p>
<p>Lower commodity prices also drove another decline in Australia’s terms of trade which fell by 7.9%. The terms of trade measure the price of Australian’s exports relative to the price of imports, meaning that Australia is getting fewer imports for its exports – something that will inevitably feed into our standard of living.</p>
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<p>This subdued economic growth is the primary reason the Reserve Bank decided to hold interest rates <a href="https://www.rba.gov.au/media-releases/2023/mr-23-23.html">constant</a> at its board meeting yesterday. </p>
<p>The bank is expecting economic growth to decelerate to an annual rate of only <a href="https://www.rba.gov.au/publications/smp/2023/aug/pdf/forecast-table-2023-08.pdf">0.9%</a> by the end of the year, in large measure because of the series of 12 interest rate rises it has imposed since May last year.</p>
<p>One of the bank’s biggest concerns, and one of the government’s biggest concerns, is labour productivity (GDP per hour worked) which slid a further 2% in the quarter to be down <a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/jun-2023">3.6%</a> over the year. </p>
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<p>The bank’s outgoing governor Philip Lowe says falling or weak productivity growth makes wage increases more likely to feed inflation, limiting his freedom to cut interest rates, a point he might address in his final speech as governor on Thursday, to be entitled <a href="https://rba.livecrowdevents.tv/SpeechbyPhilipLoweGovernorAnikaFoundation7sept">Some Closing Remarks</a>.</p>
<p>Boosting productivity – how much we produce for each hour we work – is important. Our standard of living and the pain we need to inflict to fight inflation will depend on it.</p><img src="https://counter.theconversation.com/content/212642/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Isaac Gross does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Six charts explain the Australian economy. Three of the most disturbing show living standards going backwards, productivity collapsing and household saving falling to a 15-year low.Isaac Gross, Lecturer in Economics, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2060682023-06-07T07:39:01Z2023-06-07T07:39:01ZGoing down: the 6 graphs that show economic growth shrinking<figure><img src="https://images.theconversation.com/files/530549/original/file-20230607-21-8nixs9.png?ixlib=rb-1.1.0&rect=437%2C419%2C3173%2C1640&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
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<p>It’s the weakest growth since the economy shrank during the COVID lockdowns, and, before that, the weakest economic growth since December 2018.</p>
<p>If economic growth continued at that pace for four quarters, the annual rate would be 0.8%, the weakest outside of a recession.</p>
<p>And the quarterly pace is shrinking. Economic activity grew 0.8% in the June quarter of 2022, 0.6% in the September and December quarters, and most recently, in the March quarter, only 0.2%.</p>
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<p>The earlier stronger growth means gross domestic product is 2.3% larger than a year ago, a figure that looks set to become the highest for some time, but which looks less impressive when set aside the 2% growth in population. </p>
<p>Per person, gross domestic product shrank by 0.2%, the most outside of a COVID lockdown period since 2016.</p>
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<p>The main drivers of economic growth were business investment and exports of services.</p>
<p>But there was weakness in consumer spending, with spending on discretionary items slipping.</p>
<p>Households were only able to increase their essential spending (on things such as fuel, transport and rent) by saving less. Australia’s household saving ratio, the proportion of income saved, fell to just 3.7% – the least since 2008.</p>
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<p>Mortgage interest expenses doubled over the year to the March quarter, and dwelling investment fell by 1.2% in the quarter, and 4.4% over the year.</p>
<p>Business investment increased, climbing 2.4% in the quarter, but much of it was imported capital equipment, which detracted from GDP. Exports increased, with the return of international students to Australian campuses an important contributor. </p>
<h2>Who is getting what national income there is?</h2>
<p>There has been some debate about how the national pie is being shared. Related is an argument about whether it is greedy businesses or greedy workers that are responsible for higher inflation. </p>
<p>Australian Council of Trades Unions Secretary Sally McManus <a href="https://www.abc.net.au/news/2022-08-23/fact-check-sally-mcmanus-labour-s-share-of-gdp/101357044">points out</a> that labour’s share of GDP is near its lowest since the quarterly national accounts began in 1959. The profit share is near its highest.</p>
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<p>The Australia Institute has <a href="https://australiainstitute.org.au/report/profits-and-inflation-in-mining-and-non-mining-sectors/">argued</a> that most of the current excess inflation is attributable to higher corporate profits, an assessment that has been critiqued by the <a href="https://www.rba.gov.au/publications/smp/2023/may/box-b-have-business-profits-contributed-to-inflation.html">Reserve Bank</a> and <a href="https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22committees%2Festimate%2F26986%2F0000%22">Treasury</a>. </p>
<p>Much of the overall increase in the profit share is attributable to the mining sector. </p>
<p>The profit share in mining is around the highest in at least two decades, due almost entirely to higher commodity prices since Russia invaded Ukraine. </p>
<p>In the rest of the economy, the profit share is not exceptional. </p>
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<h2>What does it mean for your mortgage?</h2>
<p>Inflation appears to have peaked around the end of 2022, but the Reserve Bank is hyper-alert to any sign that inflation may not be declining towards its 2-3% target as rapidly as it would like. </p>
<p>Its <a href="https://www.rba.gov.au/publications/smp/2023/may/economic-outlook.html">most recent forecasts</a> published in May (which assumed no further increases in interest rates) envisaged inflation returning to 3% by mid-2025. </p>
<p>Governor Philip Lowe’s <a href="https://www.rba.gov.au/monetary-policy/rba-board-minutes/2023/2023-04-04.html">statement</a> following Tuesday’s board meeting suggests such a path is the slowest return to the bank’s target he will accept – the “<a href="https://www.rba.gov.au/speeches/2023/sp-gov-2023-06-07.html">narrow path</a>” he spoke about Wednesday morning.</p>
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Read more:
<a href="https://theconversation.com/the-lowe-road-the-rba-treads-a-narrow-path-199519">The Lowe road – the RBA treads a 'narrow path'</a>
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<p>Lowe <a href="https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22committees%2Festimate%2F26912%2F0000%22">believes</a> the net impact of the budget, the main economic event last month, was to <em>reduce</em> inflationary pressures.</p>
<p>Despite this, his board <a href="https://www.rba.gov.au/media-releases/2023/mr-23-13.html">lifted interest rates again</a> at its meeting this week.</p>
<p>The bank’s forecasts have annual economic growth slowing from 2.7% at the end of 2022 to 1.75% by mid-2023.</p>
<p>Today’s data is in line with that forecast, and so should not put any more pressure on the bank to increase interest rates further.</p>
<p>Its longer-term concern is labour productivity. Real GDP per hour worked has barely increased over the past few years. Lowe says this makes wage increases <a href="https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22committees%2Festimate%2F26912%2F0000%22">more likely</a> to add to inflation and reduces the leeway he has to hold off on pushing up rates.</p><img src="https://counter.theconversation.com/content/206068/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Hawkins formerly worked as a senior economist for the Reserve Bank and Australian Treasury.
</span></em></p>Per person, gross domestic product shrank 0.2% in the three months to March, the most outside of a COVID downturn since 2016.John Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2006312023-03-01T06:42:36Z2023-03-01T06:42:36ZInflation still the ‘defining challenge’ as economic activity slows<figure><img src="https://images.theconversation.com/files/512804/original/file-20230301-14-mmrbwy.jpg?ixlib=rb-1.1.0&rect=547%2C0%2C4526%2C2236&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Australia has recovered better than most from the COVID pandemic. As measured by gross domestic product (GDP), the economy is now 7% larger than it was before the pandemic. </p>
<p>Over 2022, the economy expanded by 2.7% – more than any of the seven largest advanced economies, and more than twice the average growth rate in the <a href="https://www.oecd.org/sdd/na/GDP-Growth-Q422.pdf">OECD</a>. </p>
<p>That’s the good news from the latest <a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">national accounts</a> data from the Australian Bureau of Statistics, covering the last quarter of 2022. Federal Treasurer Jim Chalmers dutifully noted these things in his press conference following the release of the accounts. But he was far from exuberant.</p>
<p>The economic story of 2022 was complete, he said, but the unfolding story of 2023 was unpredictable.</p>
<p>He was “<a href="https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/national-accounts-december-quarter-2022">cautiously optimistic</a>” inflation had peaked. But he warned that rising prices remained “the defining challenge” amid a global economic slowdown and geopolitical uncertainty. In particular, he noted concerns about rising interest rates and wages not keeping pace with increases in the cost of living. </p>
<h2>Growth is slowing</h2>
<p>The December quarter accounts provided the the first set of annual accounts since 2019 unaffected by COVID-related measures such as lockdowns and border closures.</p>
<p>GDP growth was 0.6% in the first quarter of 2022, 0.9% in the second, and 0.7% in the third. The 0.5% growth in the December quarter therefore indicates economic activity is slowing (or “moderating”, as Chalmers put it).</p>
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<p>In the December quarter, exports rose by 1.1% as the tourism and the international education markets rebounded. Imports fell by 4.3%, implying some spending on foreign goods and services was replaced by domestic goods and services. </p>
<p>Partly offsetting this was that companies invested less – an indication of lower confidence about the future. Dwelling investment also declined. The Australian Bureau of Statistics attributed this to the completion of renovations that had been subsidised by the Morrison Government’s HomeBuilder scheme. </p>
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Read more:
<a href="https://theconversation.com/scott-morrisons-homebuilder-scheme-is-classic-retail-politics-but-lousy-economics-140076">Scott Morrison’s HomeBuilder scheme is classic retail politics but lousy economics</a>
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<h2>Per capita performance</h2>
<p>So what does this mean for the average person? </p>
<p>The best indicator of this in the national accounts is <a href="https://www.abs.gov.au/statistics/detailed-methodology-information/concepts-sources-methods/australian-system-national-accounts-concepts-sources-and-methods/2020-21/chapter-20-analytical-measures/real-income-measures">real net national disposable income per capita</a>. This removes the effects of population growth and inflation.</p>
<p>Some of the recent increase, however, is attributable to higher commodity prices benefiting our miners and farmers, which may not be flowing through to the “average” Australian. </p>
<p>(There are also other aspects of <a href="https://press-files.anu.edu.au/downloads/press/p278051/pdf/7.-The-Four-Approaches-to-Measuring-Wellbeing.pdf">wellbeing</a> not captured by this measure. It still provides a useful proxy for the standard of living.)</p>
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<h2>Wages aren’t growing much</h2>
<p>What’s clear is that inflation is not being driven by wage increases. The share of national income going to labour (workers) remains <a href="https://www.abc.net.au/news/2022-08-23/fact-check-sally-mcmanus-labour-s-share-of-gdp/101357044">near a 60-year low</a>. Conversely, the share going to capital (as profits to owners and investors) is near a 60-year high.</p>
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<h2>Household saving falling</h2>
<p>Household savings surged during COVID, as opportunities to spend on entertainment, leisure and travel were curtailed. The household saving ratio has now returned to its pre-COVID level. </p>
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<p>This is partly due to higher spending on things like dining out, but it also reflects tightening budgets as cost-of-living pressure and interest rate increases weigh on family budgets. Overall, consumer spending in the December quarter rose just 0.3%, the weakest quarterly rise since the September 2021 quarter, which was affected by lockdowns in Melbourne and Sydney.</p>
<p>There is more pain to come. Despite Chalmers’ cautious optimism that inflation has peaked, the Reserve Bank of Australia is still likely to increase interest rates further, in its mission to return inflation to its 2-3% target range while not dampening economic activity so much that a recession ensues.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/the-lowe-road-the-rba-treads-a-narrow-path-199519">The Lowe road – the RBA treads a 'narrow path'</a>
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<p>RBA governor Philip Lowe has described it as a “narrow path”. He’s right.</p><img src="https://counter.theconversation.com/content/200631/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Hawkins previously worked as a macroeconomic analyst and forecaster in the Reserve Bank and the Australian Treasury.</span></em></p>Australia faces an unpredictable global outlook, rising interest rates and wages not keeping up with the cost of living.John Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1959362022-12-06T05:24:59Z2022-12-06T05:24:59ZThis latest increase in RBA interest rates might well be the last, for some time<figure><img src="https://images.theconversation.com/files/499177/original/file-20221206-19601-800hvm.png?ixlib=rb-1.1.0&rect=826%2C712%2C3167%2C1556&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>You might not know it from reading Tuesday’s statement announcing Australia’s eighth consecutive increase in interest rates, but our Reserve Bank might finally have done enough.</p>
<p>The statement says inflation is still “<a href="https://www.rba.gov.au/media-releases/2022/mr-22-41.html">too high</a>” and that the bank expects to increase rates further, although it is “not on a pre-set course”.</p>
<p>But, as it happens, the bank is unlikely to increase rates again for a further two months. The board doesn’t meet in January, meaning the nine weeks between now and its first meeting for 2023 on February 7 will provide an unusually long time for reflection – the first after eight relentless months of hikes.</p>
<p>From time to time, Reserve Bank officials talk about the idea of a “pause”. AMP chief economist Shane Oliver has counted the number of occasions they have referred to the prospect of a “pause” in public pronouncements in the past month. He has counted six.</p>
<h2>Inflation to hit 8%, while weakening</h2>
<p>Although the annual inflation figure for the year to December due on January 25 is expected to be high – the bank is expecting <a href="https://www.rba.gov.au/media-releases/2022/mr-22-41.html">8%</a> – the quarter-to-quarter result is likely to show inflation weakening.</p>
<p>The Bureau of Statistics releases the <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release">quarterly inflation figures</a> only once every three months. But for some time now it has also been calculating inflation <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/monthly-consumer-price-index-indicator/latest-release">monthly</a>, using a smaller survey that seems to give a pretty good indication of what the larger survey is about to show.</p>
<p>Oliver has graphed what the smaller survey has been saying each month about inflation over the previous three months alongside what the larger quarterly survey has been saying. The two line up, except that in recent months the monthly measure has been sliding.</p>
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<p>This suggests that the official quarterly figure released in January will be weak.</p>
<p>Oliver concedes that the new monthly measure needs to be interpreted with caution, partly because it excludes 30% of the items included in the official quarterly measure, among them gas and electricity. But he says if 70% of the quarterly measure is cooling down, “that has to be a positive sign”.</p>
<p>Globally, oil prices and wheat prices and the prices of other things affected by Russia’s invasion of Ukraine are down <a href="https://markets.businessinsider.com/commodities/wheat-price/usd?op=1">one-quarter</a> to <a href="https://tradingeconomics.com/commodity/crude-oil">one-third</a> from their peaks in the middle of the year, undoing much of what has been driving inflation.</p>
<h2>The US is considering moderation</h2>
<p>In the United States, where inflation peaked at <a href="https://tradingeconomics.com/united-states/inflation-cpi">9.1%</a> in June and has since slid to 7.7%, the head of the Federal Reserve Jerome Powell has begun talking about “<a href="https://www.federalreserve.gov/newsevents/speech/powell20221130a.htm">moderating the pace of rate increases</a>” saying given all he has done, he mightn’t need to raise rates much further to tame inflation.</p>
<p>Australia’s Reserve Bank has already moderated the size of its increases, cutting each one from 0.5 percentage points per month to 0.25 points in September. </p>
<p>If it merely wants to get inflation down (as it says it does) and not needlessly damage the economy along the way, there’s a good case for leaving rates steady at its first meeting for the year in February, and then waiting until sees the full impact of what it has done so far.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/global-recession-is-increasingly-likely-heres-how-australia-could-escape-191336">Global recession is increasingly likely. Here's how Australia could escape</a>
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<p>Australia’s eight rate rises to date are set to push up the cost of payments on a typical $600,000 variable mortgage by a total of $1,000 per month.</p>
<p>The bank said in October that although most borrowers should be able to weather that increased financial pressure for some time, many would “need to curtail their consumption and some could <a href="https://www.rba.gov.au/publications/fsr/2022/oct/pdf/box-b-the-impact-of-rising-interest-rates-and-inflation-on-indebted-households-cash-flows.pdf">ultimately see their savings buffers exhausted</a>”.</p>
<p>If these households have limited ability to make adjustments to their financial situation (such as by increasing their hours worked) they could fall into arrears and “may eventually need to sell their homes or may even enter into foreclosure”. </p>
<p>For fixed-rate borrowers, things are worse. About one-third of mortgages are on fixed rates, and about two-thirds of them are <a href="https://www.rba.gov.au/publications/fsr/2022/oct/pdf/02-household-business-finances-in-australia.pdf">due to expire next year</a>. Many were taken out at fixed rates of around 2%. Depending on how high the Reserve Bank pushes things, those borrowers will suddenly find themselves paying 6-7%.</p>
<h2>We’re tightening our belts</h2>
<p>Spending plans are already crumbling. Asked whether now is a “good time to buy a major household item” in the Westpac-Melbourne Institute November confidence survey, consumers’ answers were about as dismal as they have ever been. Around <a href="https://library.westpaciq.com.au/content/dam/public/westpaciq/secure/economics/documents/aus/2022/11/er20221108BullConsumerSentiment.pdf">40%</a> said they planned to spend less on gifts this year than the year before – the highest proportion since the question was first asked in 2009. </p>
<p>Wednesday’s national accounts will show company profits fell by a seasonally adjusted <a href="https://www.abs.gov.au/statistics/economy/business-indicators/business-indicators-australia/sep-2022">12.4%</a> in the three months to September, led down by profits in retail (-6%), manufacturing (-21%) and finance (-43%). Accommodation (up 64% after years in which it was hard to travel) is the only big exception.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/in-defence-of-rba-governor-lowe-an-easy-scapegoat-for-rates-194037">In defence of RBA Governor Lowe: an easy scapegoat for rates</a>
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<p>Quarterly economic growth is expected to be weak, although the annual figure will look good because things were worse during the lockdowns a year before.</p>
<p>The national accounts will also show a jump in wage payments of <a href="https://www.abs.gov.au/statistics/economy/business-indicators/business-indicators-australia/sep-2022">2.9%</a> over the quarter, and 11% over the year – which sounds high, but much of it will be because of the extra 690,000 people employed. Pay per worker will have climbed 4.7%.</p>
<p>A good reading of Wednesday’s national accounts will be that eight consecutive increases in mortgage rates are starting to bite into household budgets in exactly the way the Reserve Bank wants, and that there’s a chance they’ll bite too hard.</p>
<p>On February 7 the board might feel entitled to take the view that it might have done enough, and hold off for a while while it waits to see how things play out.</p><img src="https://counter.theconversation.com/content/195936/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Martin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The full effects of the eight consecutive increases in the Reserve Bank’s cash rate are yet to become apparent, and there are signs inflation is on the way down.Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1899512022-09-07T07:39:57Z2022-09-07T07:39:57ZAustralia’s June quarter national accounts show GDP doing well - for now<figure><img src="https://images.theconversation.com/files/483188/original/file-20220907-16-6xdmsq.png?ixlib=rb-1.1.0&rect=0%2C0%2C4000%2C1976&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Wes Mountain/The Conversation</span>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span></figcaption></figure><p>Tuesday’s national accounts show Australia ending 2021-22 on a strong note. </p>
<p>Gross domestic product grew by a historically robust 0.9% in the three months to June, and by an unusually-high <a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">3.6%</a> over the year.</p>
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<p>Australia’s economy is now more than 5% bigger than it was before COVID, a better performance than most comparable economies.</p>
<p>The main drivers of the 0.9% jump in activity were household spending and exports.</p>
<p>Household spending grew 2.2% in the quarter, exports grew 5.5%. </p>
<p>Each contributed about one percentage point to the growth in GDP. Working the other way was a smaller build-up of inventories (unsold stock) that lowers the amount of production needed to meet the increased demand.</p>
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<p>Households have been saving less in order to spend more. Since the start of this year, household saving has slipped from 13.5% to a more normal 8.7%.</p>
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<p>Spending has also been supported by the fall of unemployment, now down to a near half-century low of <a href="https://www.abs.gov.au/media-centre/media-releases/unemployment-rate-falls-34">3.4%</a>, a low that might be sustained for <a href="https://theconversation.com/why-unemployment-is-set-to-stay-below-5-for-years-to-come-188705">quite a while</a>.</p>
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<p>In good news for government tax revenue, the <em>value</em> of Australia’s mineral exports also climbed due to higher commodity prices. </p>
<p>Price isn’t taken into account in compiling the most-widely quoted GDP measure, which is “real” GDP, a measure of volumes rather than prices. </p>
<p>Australia’s <a href="https://www.rba.gov.au/education/resources/explainers/australia-and-the-global-economy.html">terms of trade</a> (the ratio of export prices to import prices) reached an all-time high.</p>
<p>Investment spending by companies continued to remain <a href="https://www.abs.gov.au/statistics/economy/business-indicators/private-new-capital-expenditure-and-expected-expenditure-australia/jun-2022">flat</a>, after rebounding from COVID last year. </p>
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<p>As <a href="https://www.abc.net.au/news/2022-08-23/fact-check-sally-mcmanus-labour-s-share-of-gdp/101357044">highlighted</a> by ACTU secretary Sally McManus, the share of national income accruing to labour remains at a near 60-year low. </p>
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<p>In the June quarter profits again grew faster than wages. It remains to be seen whether initiatives from the <a href="https://treasury.gov.au/sites/default/files/inline-files/Jobs-and-Skills-Summit-Outcomes-Document.pdf">Jobs and Skills Summit</a> will do much to change this.</p>
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<p>Today’s good-looking news may not be a good guide to the future.</p>
<p>The three months to June were barely affected by the Reserve Bank’s five successive interest rate rises that began in May. </p>
<p>Monetary policy is famously said to have “<a href="https://www.jstor.org/stable/pdf/1828534.pdf">long and variable lags</a>”. </p>
<p>The Reserve Bank is almost certainly not done with interest rate increases. On Tuesday it said it expected to increase rates “<a href="https://www.rba.gov.au/media-releases/2022/mr-22-28.html">further over the months ahead</a>”. </p>
<p>But it also said it was “not on a pre-set path”.</p>
<h2>Economic management is about to get harder</h2>
<p>The Bank has to navigate between the <a href="https://www.britannica.com/topic/Scylla-and-Charybdis">Scylla</a> of the inflation it would get from not lifting interest rates enough and the <a href="https://mythology.net/greek/greek-creatures/charybdis/">Charybdis</a> of the recession it would get from lifting them too much. It is trying to find a Goldilocks path of “just right”.</p>
<p>As it happens, there’s a piece of news that should gladden its heart in the national accounts. Last year, it was giving the impression it wouldn’t lift rates until wage growth took off. This year in May it lost patience and lifted rates anyway, saying its business liaison program suggested companies were starting to pay more.</p>
<p>The national accounts show the compensation of employees (wages plus super) grew 7% over 2021-22, well above the official wage growth figure of <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/wage-price-index-australia/latest-release">2.6%</a>.</p>
<p>Some of this is due to more people being in work. But not all. The bank might be starting to get what it wanted.</p><img src="https://counter.theconversation.com/content/189951/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Hawkins formerly worked as a senior economist in the Reserve Bank and Australian Treasury.</span></em></p>Australia’s economy grew unusually strongly in the year to June, when interest rate increases were yet to bite.John Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1839162022-06-01T09:18:34Z2022-06-01T09:18:34ZNational income is climbing, but the share going to wages is shrinking<figure><img src="https://images.theconversation.com/files/466560/original/file-20220601-48861-924wcu.png?ixlib=rb-1.1.0&rect=238%2C179%2C3363%2C1529&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Australia’s economy edged closer back towards normal in the three months to March, growing by 0.8% in the quarter (which is towards the upper end of economic growth before COVID hit in early 2020) and <a href="https://www.abs.gov.au/media-centre/media-releases/economic-activity-increased-08-march-quarter">3.3%</a> over the year to the March (which is somewhat higher than before the pandemic).</p>
<p>The economy is now 4.5% bigger than before the COVID pandemic started. This is a stronger recovery than experienced in the United States, the European Union, the United Kingdom, South Korea and Canada. </p>
<p>Japan’s economy remains smaller than it was before COVID. </p>
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<p>Consumer spending grew an impressive 1.5% in the March quarter, and 4% over the year, spurred by a further easing of restrictions and a renewed desire to travel. </p>
<p>Spending on travel services surged 60%. Car sales jumped 13%.</p>
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<p>Helping fund the increased spending was a further dip in the household saving ratio, slipping from 13.4% to 11.4% of income.</p>
<p>As seen on the graph, it is still much higher than it was in the four decades before COVID, giving it room to fall further if consumers remain confident.</p>
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<p>The drop in unemployment to a <a href="https://theconversation.com/at-3-9-australias-unemployment-rate-now-officially-begins-with-3-whats-next-183226">half-century low of 3.9%</a> has lifted consumer confidence and spending, although the jump in inflation to <a href="https://theconversation.com/inflation-hits-5-1-how-long-until-mortgage-rates-climb-181832">5.1%</a> and the first of several <a href="https://theconversation.com/rba-governor-philip-lowe-is-hiking-interest-rates-worst-case-itll-mean-an-extra-600-per-month-on-a-500-000-mortgage-182241">interest rate hikes</a> have damped confidence more recently.</p>
<p>Government spending, notably on health care, contributed to economic growth.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/inflation-hits-5-1-how-long-until-mortgage-rates-climb-181832">Inflation hits 5.1%. How long until mortgage rates climb?</a>
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<p>The Bureau of Statistics <a href="https://www.abs.gov.au/media-centre/media-releases/import-demand-narrows-current-account-surplus">noted</a> a surge in imported rapid antigen tests.</p>
<p>Construction was weak, both for business and housing, partly reflecting shortages of skilled labour. </p>
<h2>Sharing the cake</h2>
<p>The closest measure of total average well-being we can get from the national accounts is real net national disposable income per capita. </p>
<p>While this climbed 1% in the March quarter, it doesn’t necessarily mean the typical Australian household is better off.</p>
<p>What matters is how the cake is divided between wages and profits.</p>
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<p>The Russian attack on Ukraine drove up commodity prices, driving the ratio of export prices to import prices to a record high.</p>
<p>This lifted the profits of Australian mining companies <a href="https://www.abs.gov.au/statistics/economy/business-indicators/business-indicators-australia/mar-2022">25%</a>. </p>
<p>The share of national income going to profits climbed to an all-time high of 31.1%.</p>
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<p>As a result, even though <a href="https://theconversation.com/at-3-9-australias-unemployment-rate-now-officially-begins-with-3-183226">more of the population was in work than ever before</a>, the share of national income going to wages sunk to a near all-time low of 49.8%.</p>
<p>Before COVID the wages share was 53%. At the start of the 2000s it was 56%.</p>
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<p>Working out the reasons for the downward trend in the share of national income going to wages, and how to get it higher, will be an important priority for the new government.</p>
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<strong>
Read more:
<a href="https://theconversation.com/at-3-9-australias-unemployment-rate-now-officially-begins-with-3-183226">At 3.9%, Australia's unemployment rate now officially begins with '3'</a>
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<img src="https://counter.theconversation.com/content/183916/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Hawkins has been an economic analyst and forecaster in the Reserve Bank of Australia and the Australian Treasury.</span></em></p>New figures show economic growth edged closer back towards normal in the months to March, but the gains went to profits rather than wages.John Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1821712022-05-17T20:00:54Z2022-05-17T20:00:54ZAre real wages falling? Here’s the evidence<figure><img src="https://images.theconversation.com/files/463546/original/file-20220517-27-3xyvd6.png?ixlib=rb-1.1.0&rect=1016%2C566%2C2836%2C1577&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>You would be forgiven for being unsure about whether the buying power of wages was rising or falling. On one hand, Opposition Leader Anthony Albanese says wages are <a href="https://twitter.com/albomp/status/1460885805329641477">going backwards</a>. </p>
<p>On the other, Prime Minister Scott Morrison points to “<a href="https://www.liberal.org.au/latest-news/2022/05/15/prime-minister-speech-liberal-election-campaign-launch">better wages</a>” over his government’s term in office.</p>
<p>To get at the truth, we need to appreciate that prices fluctuate more rapidly than wages do and that underlying economic forces drive the longer term growth in real wages. </p>
<p>These two factors have produced real growth in wages over the past 10 years, but a fall over the past year. </p>
<h2>Buying power</h2>
<p>The best way to measure changes in the buying power of wages is to examine changes in their “<a href="https://www.economicshelp.org/blog/146717/economics/real-vs-nominal/">real</a>” value, measured by changes in wages in relation to changes in prices, usually measured by the consumer price index.</p>
<p>The real value of the award rates of pay determined by the Fair Work Commission, including the <a href="https://www.fwc.gov.au/agreements-awards/minimum-wages-and-conditions/national-minimum-wage">minimum wage</a>, climbed in all but but one of the ten years between 2011 and 2020, at an average of slightly more than 1% per year.</p>
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<p>But the buying power of an award wage fell 2.5% during the last 12 months, because of the unexpected, large rise in consumer prices of <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release">5.1%</a>. </p>
<p>This increase in consumer prices easily eclipsed the most recent – July 2021 – increase in award wages of <a href="https://www.fwc.gov.au/documents/wage-reviews/2020-21/decisions/pr729671.pdf">2.6%</a> increase in award wages. </p>
<p>The high inflation was caused in part by the impact on fuel prices of the Russian invasion of Ukraine, which no one could have anticipated inflation fluctuates much more than wages do in the short run.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/inflation-hits-5-1-how-long-until-mortgage-rates-climb-181832">Inflation hits 5.1%. How long until mortgage rates climb?</a>
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</em>
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<hr>
<p>Most workers (about three-quarters) are paid at more than award wages. </p>
<p>One measure of what has happened to them is <a href="https://www.fwc.gov.au/documents/wage-reviews/2021-22/statisticalreportv5.pdf">average weekly ordinary time earnings</a> of adults who work full-time, excluding overtime. </p>
<p>This too has grown in real terms over the past decade, by about as much as award rates. And it too has fallen in real terms over the past year, because of the sharp rise in inflation.</p>
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<p>Another measure is the Bureau of Statistics’ <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/wage-price-index-australia/latest-release">wage price index</a> which measures the hourly pay for the job, regardless of who is doing it. This is the key cost measure for employers. </p>
<p>Many employees get pay rises through promotions or switching employers. By design, the wage price index does not capture that, and so has grown more slowly. </p>
<hr>
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<p>Even the wage price index has grown faster than inflation, by 4% over the past 10 years, until the last year, when the sudden jump in inflation pushed it behind.</p>
<h2>Cost to employers</h2>
<p>For employers, the labour cost of delivering a unit of output depends both on how much the worker produces in an hour (known as <a href="https://www.investopedia.com/terms/l/labor-productivity.asp">productivity</a>), and how much the worker is paid for that hour (the wage).</p>
<p>Over the past decade, the Bureau of Statistics’ measure of labour productivity has climbed <a href="https://www.fwc.gov.au/documents/wage-reviews/2021-22/statisticalreportv5.pdf">12%</a>, while real wages (as captured in the wage price index) have grown only modestly.</p>
<p>This has resulted in a 6% decline in the Bureau’s measure of real unit labour costs, and in the share of national income that goes to labour rather than to capital. </p>
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<p>It’s not clear why this happened, but there are suspects.</p>
<p>One is that the total income per person, available to be shared between wages and profits, stagnated for much of the past decade, being no greater by the end of 2018 than it was in 2011. </p>
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<p>The recent rise in export prices has boosted national income, but much of it has accrued to the mining sector in the form of profits. The wages share of mining income is only 14%, compared with 55% for the rest of the economy.</p>
<p>The result has been an increase in the share of national income going to profits and a slide in the proportion going to wages.</p>
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<p>Other sources of downward pressure on wages growth include high rates of immigration, especially of temporary workers such as students, tight caps on wage increases for state and federal government employees, increased outsourcing to low-wage countries, and <a href="https://theconversation.com/despite-record-vacancies-australians-shouldnt-expect-big-pay-rises-soon-180416">declining union membership</a>.</p>
<p>Low union membership not only reduces the power of unions to bargain for higher wages, it also reduces their ability to ensure that the conditions set by the Fair Work Commission are met by employers.</p>
<h2>Declining union power</h2>
<p>This is of particular concern at a time when there is a large, new, vulnerable group in the workforce: temporary migrants dependent on employers to retain their visas.</p>
<p>As of May 2022, there are signs that wage growth is at last likely to increase, which will be quite an achievement in the midst of COVID. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/despite-record-vacancies-australians-shouldnt-expect-big-pay-rises-soon-180416">Despite record vacancies, Australians shouldn't expect big pay rises soon</a>
</strong>
</em>
</p>
<hr>
<p>The signs include low unemployment and underemployment; a record high number of Australians employed, and employed full-time; record high vacancy rates; and robust household spending and profits. </p>
<p>The biggest immediate beneficiaries appear to be younger workers and older workers, and women. There is ground to make up.</p><img src="https://counter.theconversation.com/content/182171/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sue Richardson does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The buying power of wages began slipping mid last year year. The wages share of national income has been sliding since 2016.Sue Richardson, Adjunct professor, Flinders UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1778212022-03-02T05:58:26Z2022-03-02T05:58:26ZWednesday’s GDP numbers are impressive, but they are for the December quarter, when we were bouncing back from Delta<p>Australia’s economy bounced back a welcome 3.4% in the December quarter of 2021, more than reversing the 1.9% lockdown-related decline in the September quarter. It was the sixth-biggest increase in the 60 years the figures have been compiled. </p>
<hr>
<p><strong>Australian quarterly gross domestic product</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/449364/original/file-20220302-23-15ler5k.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/449364/original/file-20220302-23-15ler5k.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/449364/original/file-20220302-23-15ler5k.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/449364/original/file-20220302-23-15ler5k.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/449364/original/file-20220302-23-15ler5k.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/449364/original/file-20220302-23-15ler5k.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/449364/original/file-20220302-23-15ler5k.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/449364/original/file-20220302-23-15ler5k.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Chain volume measures, seasonally adjusted.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">ABS National Accounts</a></span>
</figcaption>
</figure>
<hr>
<p>The economy grew by 4.2% over the year to December, making it 3.4% bigger than it was two years earlier, before COVID. </p>
<p>This is <a href="https://www.abs.gov.au/articles/international-and-state-economies-during-december-quarter-2021">similar</a> to what happened in the United States, but better than what happened in the European Union and South Korea. The economies of the UK and Japan are still smaller than they were before COVID. </p>
<p>While it is impressive in the circumstances, before the pandemic real GDP was set to climb 6% rather than 3.4% over those two years. That’s what the <a href="https://www.rba.gov.au/publications/smp/2019/nov/forecasts.html">Reserve Bank</a> was forecasting. </p>
<h2>The South East versus the rest</h2>
<p>It depended very much on where you lived. NSW, Victoria and the ACT were constrained by lockdowns in the September quarter.</p>
<p>Those states bounced back most strongly in the December quarter. </p>
<p>It is notable, and concerning, that in the other states the best measure of total spending, state final demand, barely grew at all or went backwards.</p>
<hr>
<p><strong>State final demand, December quarter</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/449647/original/file-20220302-23-mljvg1.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/449647/original/file-20220302-23-mljvg1.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/449647/original/file-20220302-23-mljvg1.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=201&fit=crop&dpr=1 600w, https://images.theconversation.com/files/449647/original/file-20220302-23-mljvg1.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=201&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/449647/original/file-20220302-23-mljvg1.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=201&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/449647/original/file-20220302-23-mljvg1.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=253&fit=crop&dpr=1 754w, https://images.theconversation.com/files/449647/original/file-20220302-23-mljvg1.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=253&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/449647/original/file-20220302-23-mljvg1.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=253&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Seasonally adjusted.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">ABS National Accounts</a></span>
</figcaption>
</figure>
<hr>
<p>Household spending was the main driver of the stronger GDP.</p>
<p>It bounced back in the December quarter as unemployment fell, vaccination rates rose and consumer confidence climbed ahead of Omicron in the belief COVID was coming under control.</p>
<hr>
<p><strong>Household final consumption expenditure</strong></p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/449370/original/file-20220302-15-1oxnfxy.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/449370/original/file-20220302-15-1oxnfxy.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/449370/original/file-20220302-15-1oxnfxy.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/449370/original/file-20220302-15-1oxnfxy.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/449370/original/file-20220302-15-1oxnfxy.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/449370/original/file-20220302-15-1oxnfxy.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/449370/original/file-20220302-15-1oxnfxy.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Chain volume measures, seasonally adjusted.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">ABS National Accounts</a></span>
</figcaption>
</figure>
<hr>
<p>Spending on services surged. Personal and other services, the category that includes hairdressing, climbed by a record 15%. </p>
<p>There were also some big increases in spending on non-essential goods. Purchases of clothing and footwear jumped by more than 40%.</p>
<hr>
<p><strong>Components of household final consumption expenditure</strong></p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/449434/original/file-20220302-23-1acvc7q.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/449434/original/file-20220302-23-1acvc7q.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=310&fit=crop&dpr=1 600w, https://images.theconversation.com/files/449434/original/file-20220302-23-1acvc7q.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=310&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/449434/original/file-20220302-23-1acvc7q.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=310&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/449434/original/file-20220302-23-1acvc7q.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=390&fit=crop&dpr=1 754w, https://images.theconversation.com/files/449434/original/file-20220302-23-1acvc7q.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=390&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/449434/original/file-20220302-23-1acvc7q.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=390&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">December quarter growth in real household final consumption expenditure.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">ABS National Accounts</a></span>
</figcaption>
</figure>
<hr>
<p>Households have been saving an unusually high proportion of their income during the pandemic. </p>
<p>The saving ratio soared to a record high early in the pandemic, fell during the 2020 recovery, soared again during the 2021 lockdowns, and fell in the December quarter. </p>
<p>But it remains, as the Treasurer said in his press conference, around three times what it would have otherwise been without the pandemic.</p>
<hr>
<p><strong>Household saving ratio</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/449372/original/file-20220302-27-180zpm5.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/449372/original/file-20220302-27-180zpm5.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/449372/original/file-20220302-27-180zpm5.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/449372/original/file-20220302-27-180zpm5.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/449372/original/file-20220302-27-180zpm5.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/449372/original/file-20220302-27-180zpm5.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/449372/original/file-20220302-27-180zpm5.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/449372/original/file-20220302-27-180zpm5.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Ratio of saving to net-of-tax income, seasonally adjusted.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">ABS National Accounts</a></span>
</figcaption>
</figure>
<hr>
<p>Much of the saving is the result of caution, but much also reflects government support programs that maintained incomes at times when people were limited in their ability to spend on travel, restaurants, cinemas, gyms and other services. </p>
<p>Some of the frustrated services spending was diverted to goods, exacerbating supply bottlenecks and contributing to inflation.</p>
<p>Inventories climbed $1.5 billion after a fall of $2.9 billion in the September quarter as wholesalers restocked, also contributing to GDP growth. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/australia-cut-unemployment-faster-than-predicted-why-stop-now-177124">Australia cut unemployment faster than predicted – why stop now?</a>
</strong>
</em>
</p>
<hr>
<p>Export volumes fell as the reduction in coal exports (reflecting heavy rain and labour constraints) outweighed the increase in agricultural exports (reflecting a record grain harvest). </p>
<p>Housing construction also detracted from growth as shortages of workers and materials caused delays in building. </p>
<h2>Sharing the cake</h2>
<p>How were the proceeds of this higher GDP shared among Australians? </p>
<p>Treasurer Josh Frydenberg was keen to point out the wages bill climbed by more than 5% through the year as more workers found jobs, higher bonuses were paid and workers switched to better jobs and got promotions, a form of wage growth not captured in the official <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/wage-price-index-australia/latest-release">wage price index</a>.</p>
<p>The wages share of national income remained near an all-time low. Wage growth is lagging price growth, meaning workers are getting a smaller share of the pie than they have been used to.</p>
<hr>
<p><strong>Wages share of total factor income</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/449400/original/file-20220302-27-bckrtr.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/449400/original/file-20220302-27-bckrtr.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/449400/original/file-20220302-27-bckrtr.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/449400/original/file-20220302-27-bckrtr.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/449400/original/file-20220302-27-bckrtr.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/449400/original/file-20220302-27-bckrtr.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/449400/original/file-20220302-27-bckrtr.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/449400/original/file-20220302-27-bckrtr.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Compensation of employees including wages, salaries and social security contributions.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">ABS National Accounts</a></span>
</figcaption>
</figure>
<hr>
<h2>Looking forward</h2>
<p>The December quarter was between the bulk of Delta and the bulk of Omicron. </p>
<p>After the outbreak of Omicron in late December, hours worked slid <a href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/jan-2022">9%</a> in January as workers became sick, isolated and caring for friends and family who were sick.</p>
<p><a href="https://www.westpac.com.au/content/dam/public/wbc/documents/pdf/aw/economics-research/er20220209BullConsumerSentiment.pdf">Consumer sentiment</a> deteriorated in both January and February as petrol prices rose and attention turned to interest rate rises.</p>
<p>Russia’s invasion of Ukraine, and the subsequent further surge in petrol prices, is likely to depress sentiment further. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/inflation-hits-3-5-but-it-wont-budge-the-reserve-bank-on-interest-rates-175045">Inflation hits 3.5%, but it won't budge the Reserve Bank on interest rates</a>
</strong>
</em>
</p>
<hr>
<p>This means the next GDP release, covering the March quarter, will quite likely go backwards, taking GDP growth down with it.</p>
<p>Fortunately for the government, it isn’t due for release until Wednesday <a href="https://www.abs.gov.au/ausstats/abs@.nsf/webpages/abs%20release%20calendar?opendocument&dt=202206">June 1</a>, safely after the election which must be held by Saturday <a href="https://antonygreen.com.au/when-can-the-next-federal-election-be-held/">May 21</a> to avoid a separate half-Senate election.</p><img src="https://counter.theconversation.com/content/177821/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Hawkins was formerly an economic analyst and forecaster in the Reserve Bank and Treasury.</span></em></p>Away from the states bouncing out of lockdown, spending growth was weak. The next figures, to be released after the election, might show the economy turning down.John Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society and NATSEM, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1729502021-12-01T05:18:35Z2021-12-01T05:18:35ZSure, the national accounts show GDP going backwards, but look at what’s to come<p>The most revealing graph presented in Wednesday’s <a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">September quarter national accounts</a> is one showing what has happened just beyond the end of the September quarter, in the one we are in now.</p>
<p>Melbourne’s lockdown ended on October 27. </p>
<p>The graph uses anonymised bank account data to show what happened to spending in Victoria as soon <a href="https://www.abs.gov.au/articles/impact-lockdowns-household-consumption-insights-alternative-data-sources">as the lockdown was lifted</a>.</p>
<hr>
<p><strong>Selected Victorian spending data</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/434925/original/file-20211201-15-38vvlr.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/434925/original/file-20211201-15-38vvlr.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/434925/original/file-20211201-15-38vvlr.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/434925/original/file-20211201-15-38vvlr.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/434925/original/file-20211201-15-38vvlr.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/434925/original/file-20211201-15-38vvlr.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/434925/original/file-20211201-15-38vvlr.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/434925/original/file-20211201-15-38vvlr.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Aggregated bank data. Index for May 2020 = 100.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/articles/impact-lockdowns-household-consumption-insights-alternative-data-sources">ABS</a></span>
</figcaption>
</figure>
<hr>
<p>Spending on clothing, furnishings, recreation, transport and restaurants and hotels surged.</p>
<p>As happened after last year’s lockdowns, Victorians returned to spending pretty much what they had before.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/gdp-is-like-a-heart-rate-monitor-it-tells-us-about-life-but-not-our-lives-172762">GDP is like a heart rate monitor: it tells us about life, but not our lives</a>
</strong>
</em>
</p>
<hr>
<p>The September quarter national accounts released on Wednesday are a statement of their time – they show what things were like when NSW, Victoria and the ACT were locked down.</p>
<p>Australia’s gross domestic product shrank 1.9% in the three months to September, after climbing for four consecutive quarters following the record hit of 6.8% from the first wave of COVID and last year’s lockdowns.</p>
<hr>
<p><strong>Australian quarterly gross domestic product</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/434882/original/file-20211201-27-19flwj6.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/434882/original/file-20211201-27-19flwj6.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/434882/original/file-20211201-27-19flwj6.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/434882/original/file-20211201-27-19flwj6.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/434882/original/file-20211201-27-19flwj6.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/434882/original/file-20211201-27-19flwj6.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/434882/original/file-20211201-27-19flwj6.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/434882/original/file-20211201-27-19flwj6.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Chain volume measures, seasonally adjusted.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">ABS</a></span>
</figcaption>
</figure>
<hr>
<p>The biggest hit to GDP came from household spending, down 4.8% in the quarter.</p>
<p>National spending on hotels, cafes and restaurants fell 21.2%, spending on recreation and culture fell 11.8%, and spending on transport fell 40.8%.</p>
<hr>
<p><strong>Household final consumption expenditure</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/434887/original/file-20211201-18-ur2hec.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/434887/original/file-20211201-18-ur2hec.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/434887/original/file-20211201-18-ur2hec.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/434887/original/file-20211201-18-ur2hec.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/434887/original/file-20211201-18-ur2hec.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/434887/original/file-20211201-18-ur2hec.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/434887/original/file-20211201-18-ur2hec.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/434887/original/file-20211201-18-ur2hec.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Chain volume measures, seasonally adjusted.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">ABS</a></span>
</figcaption>
</figure>
<hr>
<p>But the decline was anything but national.</p>
<p>Whereas spending in hotels, cafes and restaurants collapsed 33% (or more) in each of the states that were locked down, in the states that weren’t, it barely suffered.</p>
<p>Aggregate spending shrank 6.5% in NSW, 1.4% in Victoria and 1.6% in the ACT, while climbing strongly in the states that weren’t locked down, surging an impressive 4% in the Northern Territory and 4.2% Tasmania.</p>
<hr>
<p><strong>State final demand, September quarter</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/434891/original/file-20211201-26-qdcqjr.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/434891/original/file-20211201-26-qdcqjr.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/434891/original/file-20211201-26-qdcqjr.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=201&fit=crop&dpr=1 600w, https://images.theconversation.com/files/434891/original/file-20211201-26-qdcqjr.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=201&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/434891/original/file-20211201-26-qdcqjr.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=201&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/434891/original/file-20211201-26-qdcqjr.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=253&fit=crop&dpr=1 754w, https://images.theconversation.com/files/434891/original/file-20211201-26-qdcqjr.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=253&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/434891/original/file-20211201-26-qdcqjr.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=253&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Seasonally adjusted.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">ABS</a></span>
</figcaption>
</figure>
<hr>
<p>Nationally, personal saving soared, with the jump centred in the lockdown states as those households whose income hadn’t taken a hit saved more because of concern about the future and fewer opportunities to spend.</p>
<p>The national household saving rate bounded back up to an extraordinary 19.8% of household income from the 11.8% it fell to in March, after hitting an all-time high of 23.3% in the first wave of lockdowns.</p>
<hr>
<p><strong>Household saving ratio</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/434886/original/file-20211201-25-jlm2h2.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/434886/original/file-20211201-25-jlm2h2.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/434886/original/file-20211201-25-jlm2h2.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/434886/original/file-20211201-25-jlm2h2.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/434886/original/file-20211201-25-jlm2h2.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/434886/original/file-20211201-25-jlm2h2.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/434886/original/file-20211201-25-jlm2h2.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/434886/original/file-20211201-25-jlm2h2.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Ratio of saving to net-of-tax income, seasonally adjusted.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">ABS</a></span>
</figcaption>
</figure>
<hr>
<p>The bank-sourced data on post-lockdown spending in the lockdown states suggests household saving is already on the way down.</p>
<p>At his parliament house press conference, Treasurer Josh Frydenberg spoke of the unusually high saving rate as a source of future spending.</p>
<p>“Not all of it is going to be spent,” he said. “But it’s a lot of damn money that’s been accumulated”.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/four-gdp-graphs-that-show-how-well-australia-was-doing-before-delta-166817">Four GDP graphs that show how well Australia was doing, before Delta</a>
</strong>
</em>
</p>
<hr>
<p>If household spending had been the only thing driving changes in gross domestic product, it would have been down 2.5%. Working in the other direction this quarter was a jump in net exports and a jump in government spending. Neither business investment nor housing construction changed much.</p>
<p>Organisation for Economic Co-operation and Development forecasts released late Wednesday have the Australian economy growing 4.1% in 2022, up from 3.8% this year, slipping back to 3% in 2023.</p>
<h2>Sustained low unemployment forecast</h2>
<p>The <a href="https://www.oecd.org/">OECD Economic Outlook</a> has Australia’s unemployment rate falling to 4.7% in 2022 and 4.3% in 2023. It says as inroads are made into unemployment, wage and price pressures will build, but are expected to “remain contained”.</p>
<p>The organisation welcomes Australia’s commitment to net zero emissions by 2050, but says the strategy should be “comprehensive, effective and inclusive”. Its report backs a call for an independent review of the Reserve Bank.</p>
<p>It forecasts global growth of 4.5% and 3.2% in 2022 and 2023.</p><img src="https://counter.theconversation.com/content/172950/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Martin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The economy shrank 1.9% in the September quarter, but figures released on Wednesday show spending roaring back as soon as the lockdowns ended.Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1727622021-11-30T04:24:30Z2021-11-30T04:24:30ZGDP is like a heart rate monitor: it tells us about life, but not our lives<figure><img src="https://images.theconversation.com/files/434613/original/file-20211130-21-ihs9bh.jpg?ixlib=rb-1.1.0&rect=356%2C267%2C2801%2C1680&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>How much cash would you need to be paid to agree to live without a smartphone for a year? </p>
<p>If you are like the typical American, the answer is <a href="https://www.hoover.org/sites/default/files/research/docs/kane_webreadypdf.pdf">US$10,000</a> – which is far, far more than what we are actually charged for having and using smartphones.</p>
<p>How much would you need to be paid to live without a computer? </p>
<p>According to the same research, just published by Stanford University’s Hoover Institution, a typical American would want US$25,000 to live computer-free for a year.</p>
<p>For the GPS system that lets us map where we are on all our devices, the answer is US$3,000; for streaming services such as Netflix the answer is another US$3,000.</p>
<p>For refrigeration the answer is US$10,000; for air conditioning, another US$10,000; and for running water US$50,000.</p>
<p>The point of this study, by economist <a href="https://www.hoover.org/sites/default/files/research/docs/kane_webreadypdf.pdf">Tim Kane</a>, is that if we add up the worth to us of everything the economy produces each year, we get much, much more than the gross domestic product – even though GDP is meant to be a summation of the prices paid each year.</p>
<p>Not a day goes by when we don’t get astounding value for money: on Kane’s estimate, about 20 times what we pay.</p>
<h2>GDP monitors changes, not our lives</h2>
<p>It’s a useful perspective to bear in mind ahead of the latest Australian gross domestic product figures, being released <a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">on Wednesday</a>. </p>
<p>Those figures will show Australia spent less, earned less and produced less in the lockdown-affected September quarter months of July, August and September than in the three months before – about 3% less on private estimates.</p>
<p>It won’t be a “recession” because in Australia that’s generally taken to mean two consecutive quarters of those things going backwards. And we already know spending, earning and production all started climbing as soon as the lockdowns ended at the beginning of the quarter we are in now.</p>
<p>The GDP has the same relationship to life as a heart rate monitor has to health.</p>
<h2>There’s more to GDP than you might think</h2>
<p>Behind the headline figure you hear about are actually three different measures.</p>
<p>GDP(P) is a measure of everything that’s <em>produced</em> in the quarter. The Bureau of Statistics has the unenviable job of adding up most things that are produced at market prices (and having a stab at trying to infer market prices where they are not apparent) in industries as diverse as mining, financial services and education.</p>
<p>It tries to count each thing only once, which is difficult because some things are used as inputs to others. Its work is made harder by relying partly on surveys and partly on complete sets of data from organisations such as the Tax Office.</p>
<p>Ask whether it uses guess work, you will be told it uses “<a href="https://unstats.un.org/unsd/economic_stat/china/pgdp/The%20Production%20Approach%20to%20Measuring%20GDP.pdf">informed judgement</a>”. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/four-gdp-graphs-that-show-how-well-australia-was-doing-before-delta-166817">Four GDP graphs that show how well Australia was doing, before Delta</a>
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</p>
<hr>
<p>GDP(E) is a totalling of government and household <em>expenditure</em> to buy those products. After adjusting for imports and exports it ought to equal GDP(P), but imperfections in measurement mean it usually doesn’t. </p>
<p>Then there’s GDP(I), which is a measure of the <em>income</em> households and businesses get from working and selling those products. Again, it ought to equal the other two, but it usually doesn’t.</p>
<p>After trying to get the three measures nearer each other (perhaps there was something somebody missed) the technicians in the bureau simply average the three, producing GDP(A). That’s what goes up on the <a href="https://www.abs.gov.au/">ABS website</a> at 11:30am AEDT Wednesday, followed by a Treasurer’s press conference and loads of analysis.</p>
<h2>It needn’t indicate an underlying condition</h2>
<p>Just as a heart rate monitor needn’t tell us much about health, because even in healthy people hearts beat slower while sleeping and faster while awake, GDP needn’t tell us that much about the condition of our lives.</p>
<p>A lot of the economy went to sleep during this year’s and last year’s lockdowns and is now waking up. The GDP will show that, but at least on Wednesday it won’t tell us more than that.</p>
<p>As it happens, economic growth has been weakening over time. Annual GDP growth is no longer the 3-4% it typically was between the early 1990s recession and the 2008 financial crisis. In the decade leading up to COVID it has been much lower, rarely touching 3%.</p>
<hr>
<p><strong>Annual financial year GDP growth</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/434627/original/file-20211130-13-1t9mgkr.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/434627/original/file-20211130-13-1t9mgkr.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/434627/original/file-20211130-13-1t9mgkr.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/434627/original/file-20211130-13-1t9mgkr.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/434627/original/file-20211130-13-1t9mgkr.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/434627/original/file-20211130-13-1t9mgkr.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/434627/original/file-20211130-13-1t9mgkr.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/434627/original/file-20211130-13-1t9mgkr.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Financial year on financial year growth, 2002-03 to 2018-19.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-system-national-accounts/2020-21#data-download">ABS</a></span>
</figcaption>
</figure>
<hr>
<p>Put starkly, for little-understood reasons unrelated to quarterly fluctuations or COVID, we are getting better off more slowly than we were.</p>
<p>There are always people who say this doesn’t matter, we should be happy with what we had (and as I noted, much of what we’ve had isn’t counted in the GDP).</p>
<h2>There is an underlying condition nonetheless</h2>
<p>But it matters a good deal, because ever since economic growth took off in the 1870s we’ve grown used to things continually getting better, and have come to expect it. </p>
<p>US economic historian Brad Delong uses an 1880s science fiction book to illustrate how much we’ve come to regard improving living standards as a birthright.</p>
<p>In <a href="https://www.google.com.au/books/edition/Looking_Backward/xpHtvz4bNZ0C">Looking Backward</a>, Edward Bellamy purports to look back from the year 2000. </p>
<p>At one point a hostess asks if he would like to hear some music. Instead of playing the piano, she merely touched one or two screws and “immediately the room was filled with the music of a grand organ”, one of four she could dial up by landline.</p>
<p>It appeared to him that</p>
<blockquote>
<p>if we could have devised an arrangement for providing everybody with music in their homes, perfect in quality, unlimited in quantity, suited to every mood, and beginning and ceasing at will, we should have considered the limit of human felicity already attained, and ceased to strive for further improvements.</p>
</blockquote>
<p>He got it wrong.</p><img src="https://counter.theconversation.com/content/172762/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>This story is part of a series on financial and economic literacy funded by Ecstra Foundation.</span></em></p>Looking beyond the latest quarterly GDP figures, the truth is we’re getting better off more slowly than before.Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1672612021-09-03T03:04:31Z2021-09-03T03:04:31ZVIDEO: Michelle Grattan on national accounts and national cabinet<p>University of Canberra Professorial Fellow Michelle Grattan and University of Canberra Vice-Chancellor and President Professor Paddy Nixon discuss the week in politics.</p>
<p>This week Michelle and Paddy discuss the state of the federation generally - with various states experiencing varying levels of lockdown and case exposure. Despite the disparity, the federal government is pushing to treat the virus as endemic.</p>
<p>They also discuss the economic growth experienced in the June quarter, and the prime minister’s further attempts to keep the minutes of national cabinet confidential.</p>
<p>CORRECTION: I misspoke when I said Queensland and NSW were making it clear they would not be dictated to - this should be Queensland and Western Australia. MG</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/rIzXXWewAyw?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
</figure><img src="https://counter.theconversation.com/content/167261/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Michelle Grattan discusses the political week that was with Professor Paddy Nixon.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1671312021-09-01T10:09:10Z2021-09-01T10:09:10ZPodcast with Michelle Grattan: Learning to live with COVID<figure><img src="https://images.theconversation.com/files/418853/original/file-20210901-26-1qswb64.png?ixlib=rb-1.1.0&rect=5%2C0%2C3988%2C2000&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption"></span> </figcaption></figure><p>As well as her interviews with politicians and experts, Politics with Michelle Grattan now includes “Word from The Hill”, where she discusses the news with members of The Conversation politics team.</p>
<p>In this episode, politics + society editor Amanda Dunn and Michelle discuss the June quarter national accounts, released on Wednesday. While this quarter was better than expected, the September quarter is certain to be negative as a result of the prolonged lockdowns.</p>
<p>They also mark the change this week in the national COVID debate, as the Victorian government, following NSW, admits defeat in the battle to get to COVID zero.</p>
<p><a href="https://itunes.apple.com/au/podcast/politics-with-michelle-grattan/id703425900?mt=2"><img src="https://images.theconversation.com/files/233721/original/file-20180827-75984-1gfuvlr.png" alt="Listen on Apple Podcasts" width="268" height="68"></a> <a href="https://www.google.com/podcasts?feed=aHR0cHM6Ly90aGVjb252ZXJzYXRpb24uY29tL2F1L3BvZGNhc3RzL3BvbGl0aWNzLXdpdGgtbWljaGVsbGUtZ3JhdHRhbi5yc3M"><img src="https://images.theconversation.com/files/233720/original/file-20180827-75978-3mdxcf.png" alt="" width="268" height="68"></a></p>
<p><a href="https://www.stitcher.com/podcast/the-conversation-4/politics-with-michelle-grattan"><img src="https://images.theconversation.com/files/233716/original/file-20180827-75981-pdp50i.png" alt="Stitcher" width="300" height="88"></a> <a href="https://tunein.com/podcasts/News--Politics-Podcasts/Politics-with-Michelle-Grattan-p227852/"><img src="https://images.theconversation.com/files/233723/original/file-20180827-75984-f0y2gb.png" alt="Listen on TuneIn" width="318" height="125"></a></p>
<p><a href="https://radiopublic.com/politics-with-michelle-grattan-WRElBZ"><img class="alignnone size-medium wp-image-152" src="https://images.theconversation.com/files/233717/original/file-20180827-75990-86y5tg.png?ixlib=rb-1.1.0&q=45&auto=format&w=268&fit=clip" alt="Listen on RadioPublic" width="268" height="87"></a> <a href="https://open.spotify.com/show/5NkaSQoUERalaLBQAqUOcC"><img src="https://images.theconversation.com/files/237984/original/file-20180925-149976-1ks72uy.png?ixlib=rb-1.1.0&q=45&auto=format&w=268&fit=clip" width="268" height="82"></a> </p>
<h2>Additional audio</h2>
<p><a href="https://freemusicarchive.org/music/Blue_Dot_Sessions/Azalai/Gaena">Gaena</a>, Blue Dot Sessions, from Free Music Archive.</p><img src="https://counter.theconversation.com/content/167131/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Michelle Grattan discusses politics with politics + society editor, Amanda DunnMichelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1668172021-09-01T05:49:18Z2021-09-01T05:49:18ZFour GDP graphs that show how well Australia was doing, before Delta<figure><img src="https://images.theconversation.com/files/417977/original/file-20210826-12-1snr3fl.jpg?ixlib=rb-1.1.0&rect=897%2C316%2C3002%2C1606&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Lukas Coch/AAP</span></span></figcaption></figure><p>Australia’s economy was performing exceptionally well in the lead-up to the Delta variant lockdowns, propped up by a barrage of government spending in the three months to June and impressive household spending.</p>
<p>The June quarter <a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">national accounts</a> published on Wednesday show inflation-adjusted production, income and spending (gross domestic product) climbed 0.7% between March and the end of June, ahead of the NSW lockdown that began on June 26.</p>
<p>Were it not for a surge in imports and a weather-related decline in the volume of exports (each of which cuts measured GDP) gross domestic product would have climbed 1.7% in the June quarter.</p>
<p>Over the year to June economic activity grew a record 9.6%, as it climbed back from a record 7% slide in the three months to June in 2020.</p>
<hr>
<p><strong>Australian quarterly gross domestic product</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/418785/original/file-20210901-27-aguxf2.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/418785/original/file-20210901-27-aguxf2.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/418785/original/file-20210901-27-aguxf2.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/418785/original/file-20210901-27-aguxf2.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/418785/original/file-20210901-27-aguxf2.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/418785/original/file-20210901-27-aguxf2.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/418785/original/file-20210901-27-aguxf2.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/418785/original/file-20210901-27-aguxf2.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Chain volume measures, seasonally adjusted.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/jun-2021">ABS</a></span>
</figcaption>
</figure>
<hr>
<p>At a Parliament House press conference, Treasurer Josh Frydenberg was the first to concede the good news was historical — of “little comfort” to Australians under renewed lockdowns facing difficult days ahead.</p>
<p>The September quarter figures, to be released in three months’ time, were likely to show an economic collapse of at least 2% — the deepest dive since 1974, with the exception of last year’s COVID collapse.</p>
<p>But the starting point for the dive was better than any other developed country. Australia is the only developed country to have gone into this year’s Delta lockdowns with both GDP and employment higher than before COVID-19 struck early last year.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-four-gdp-graphs-that-show-us-roaring-out-of-recession-pre-lockdown-161981">The four GDP graphs that show us roaring out of recession pre-lockdown</a>
</strong>
</em>
</p>
<hr>
<p>Propping up gross domestic product in the June quarter was a 7.4% surge in public infrastructure spending, driven by state and local governments, which by itself accounted for more than half of the growth in quarterly GDP.</p>
<p>A 1.3% increase in other government spending accounted for the other half.</p>
<p>But household spending accounted for almost as much, jumping 1.1% in the quarter as Australians took advantage of a relatively COVID-free autumn to boost spending on domestic tourism, on one measure by as much as 28%.</p>
<hr>
<p><strong>Household final consumption expenditure</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/418788/original/file-20210901-17-1e8q8h6.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/418788/original/file-20210901-17-1e8q8h6.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/418788/original/file-20210901-17-1e8q8h6.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/418788/original/file-20210901-17-1e8q8h6.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/418788/original/file-20210901-17-1e8q8h6.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/418788/original/file-20210901-17-1e8q8h6.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/418788/original/file-20210901-17-1e8q8h6.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/418788/original/file-20210901-17-1e8q8h6.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Chain volume measures, seasonally adjusted.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/jun-2021">ABS</a></span>
</figcaption>
</figure>
<hr>
<p>Australians were in a better position to spend than the published economic growth figures suggest. </p>
<p>A better measure of buying power is real net national disposable income per capita. This takes account of things such as high iron ore prices, which are excluded from the GDP. It shows buying power up 1.8% in the quarter to a new all-time high.</p>
<hr>
<p><strong>Real net national disposable income per capita</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/418786/original/file-20210901-25-1qqazo1.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/418786/original/file-20210901-25-1qqazo1.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/418786/original/file-20210901-25-1qqazo1.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/418786/original/file-20210901-25-1qqazo1.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/418786/original/file-20210901-25-1qqazo1.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/418786/original/file-20210901-25-1qqazo1.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/418786/original/file-20210901-25-1qqazo1.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/418786/original/file-20210901-25-1qqazo1.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Chain volume measures, seasonally adjusted.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/jun-2021">ABS</a></span>
</figcaption>
</figure>
<hr>
<p>Before the Delta lockdowns, households were continuing to wind back their record high savings rate, which peaked at 22% in June 2020. They saved 9.7% of their income in the June quarter of this year, compared to 11.9% in the March quarter.</p>
<hr>
<p><strong>Household saving ratio</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/418787/original/file-20210901-17-1t94kfb.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/418787/original/file-20210901-17-1t94kfb.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/418787/original/file-20210901-17-1t94kfb.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/418787/original/file-20210901-17-1t94kfb.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/418787/original/file-20210901-17-1t94kfb.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/418787/original/file-20210901-17-1t94kfb.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/418787/original/file-20210901-17-1t94kfb.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/418787/original/file-20210901-17-1t94kfb.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Ratio of saving to net-of-tax income, seasonally adjusted.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/jun-2021">ABS</a></span>
</figcaption>
</figure>
<hr>
<p>The lockdowns and the growing realisation they won’t have a clear end date, as they did last year, are likely to have already pushed the saving rate back up.</p>
<p>For months to come, today’s good economic news is set to be as good as it gets.</p><img src="https://counter.theconversation.com/content/166817/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Martin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Wednesday’s national accounts show the Australian economy entered the delta storm in a better position than any other developed country’s.Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1618992021-06-28T19:51:17Z2021-06-28T19:51:17ZBe suspicious of claims the mining industry creates non-mining jobs<figure><img src="https://images.theconversation.com/files/407839/original/file-20210623-13-um490o.jpg?ixlib=rb-1.1.0&rect=491%2C263%2C2674%2C1492&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Ketut Subiyanto/Pexels</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>Emblematic of the sort of claims that put the “con” into economics was an assertion by the <a href="https://www.theguardian.com/australia-news/2020/oct/25/queensland-election-why-the-resources-councils-jobs-figures-dont-pass-the-laugh-test">Queensland Resources Council</a> last year that “the resources sector employs 372,000 Queenslanders”. </p>
<p>The number employed in mining was 66,000, but the council claimed to have used input-output tables in the Australian National Accounts to add to that a much larger of “indirect” jobs created by mining. </p>
<p>It led to the awkward conclusion that mining contributed almost 46,000 full-time jobs to the electorate of McConnel, which had 40,000 enrolled voters. </p>
<p>The credulous way some of the media report such claims partly explains why the public has an inflated idea of the importance of the mining sector. </p>
<p>Surveyed Australians think coal mining makes up <a href="https://australiainstitute.org.au/wp-content/uploads/2020/12/Climate-of-the-Nation-2020-cover-WEB.pdf">9.4%</a> of the workforce. The true figure at the time was 0.4% — or around 48,200 workers nationally as of May 2020.</p>
<p>The claims derive from a lesser known part of the <a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">Australian National Accounts</a>, the ones that tell us each quarter whether or the economy has grown or whether we are in recession.</p>
<p>It comes out once a year, almost two full years after the calender year to which it refers.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/407823/original/file-20210623-27-8fmw8l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/407823/original/file-20210623-27-8fmw8l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/407823/original/file-20210623-27-8fmw8l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=1312&fit=crop&dpr=1 600w, https://images.theconversation.com/files/407823/original/file-20210623-27-8fmw8l.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=1312&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/407823/original/file-20210623-27-8fmw8l.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=1312&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/407823/original/file-20210623-27-8fmw8l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1648&fit=crop&dpr=1 754w, https://images.theconversation.com/files/407823/original/file-20210623-27-8fmw8l.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1648&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/407823/original/file-20210623-27-8fmw8l.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1648&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Drilling down.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-input-output-tables/2018-19">ABS Input Output tables</a></span>
</figcaption>
</figure>
<h2>How much value is baked in?</h2>
<p>Known as the <a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-input-output-tables/2018-19">input-output tables</a>, it’s a honeypot for consultants because it paints an incredibly detailed picture of the ways in which each part of the economy interacts with each other.</p>
<p>As an example, the most recent (which came out last month) tells us the value of bakery products manufactured was A$8.2 billion. </p>
<p>To make these baked goods, the industry used $900 million of grains and cereals, $700 million of meat (fillings for pies), and $500 million of sugar and confectionery (icing for cakes). </p>
<p>It paid $200 million to transport the goods, $100 million to clean the factories and so on. </p>
<p>This added up to $5.2 billion in payments to other industries.</p>
<p>The difference between the $8.2 billion and the $5.2 billion represents the “value added” by baking manufacturers. </p>
<p>Employees in the industry were paid $2.6 billion and there were $200 million in profits for the investors. </p>
<p>Australia also imported another $1.9 billion of bakery products.</p>
<h2>The input-output tables reveal a lot</h2>
<p>The tables also show what happened to all these bakery products. $1 billion went to restaurants and $1.5 billion to other industries. $6.8 billion were bought by households, $800 million were exported. </p>
<p>Importantly, the input-output tables enable comparisons. The industries providing the most full-time equivalent jobs are retailing, professional services and health. The industries making the largest profits are finance and iron ore and oil and gas extraction.</p>
<p>In mining, the profits paid out are ten times what’s paid out in wages. In most manufacturing and service industries more is paid out in wages than profits.</p>
<p>What the tables cannot do is tell us how many jobs an industry has “created” outside of the industry itself.</p>
<h2>Listen to the statistician</h2>
<p>A few years back, a senior treasury official called out this practice, as the following extract from a Senate committee hearing shows:</p>
<blockquote>
<p>If you add up all the jobs “created” by all the industries, you will find that we have many more jobs than there are in Australia […] In a well functioning economy any given industry that is creating jobs is doing that only to the extent that other industries are employing fewer people.</p>
</blockquote>
<p>That official was David Gruen. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/407832/original/file-20210623-13-5f2ttu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/407832/original/file-20210623-13-5f2ttu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=398&fit=crop&dpr=1 600w, https://images.theconversation.com/files/407832/original/file-20210623-13-5f2ttu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=398&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/407832/original/file-20210623-13-5f2ttu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=398&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/407832/original/file-20210623-13-5f2ttu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=500&fit=crop&dpr=1 754w, https://images.theconversation.com/files/407832/original/file-20210623-13-5f2ttu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=500&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/407832/original/file-20210623-13-5f2ttu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=500&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://parlinfo.aph.gov.au/parlInfo/download/committees/estimate/b041cb66-29a6-433c-9799-1da3784eb419/toc_pdf/Economics%20Legislation%20Committee_2012_02_16_801_Official.pdf;fileType=application%2Fpdf#search=%22committees/estimate/b041cb66-29a6-433c-9799-1da3784eb419/0000%22">Senate Economics Legislation Committee, February 16, 2012</a></span>
</figcaption>
</figure>
<p>David Gruen is now head of the Australian Bureau of Statistics. Not only does the bureau no longer publish “multipliers” that allow spurious claims to jobs created to be easily calculated, under his leadership it now publishes a very prominent <a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-input-output-tables/2018-19">warning</a>:</p>
<blockquote>
<p>The most significant limitation of economic impact analysis using multipliers is the implicit assumption that the economy has no supply–side constraints. That is, it is assumed that extra output can be produced in one area without taking resources away from other activities, thus overstating economic impacts. </p>
</blockquote>
<p>It concedes that users “can compile their own multipliers as they see fit”.</p>
<p>They shouldn’t, and we should be suspicious when they do.</p><img src="https://counter.theconversation.com/content/161899/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Hawkins does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The Australian Bureau of Statistics is doing what it can to push back against lobby groups’ over-inflated claims of job creation — but it can’t stop people misusing its figures.John Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society and NATSEM, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1619812021-06-02T07:03:01Z2021-06-02T07:03:01ZThe four GDP graphs that show us roaring out of recession pre-lockdown<p>Back in the first three months of this year when we had JobKeeper, enhanced unemployment benefits and no lockdowns, Australia roared out of recession. </p>
<p>The GDP figures released on Wednesday tell us that in the months leading up to the end of JobKeeper and the coronavirus supplement at the end of March Australians spent, earned and produced an impressive <a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/mar-2021">1.8%</a> more than in three months to December, which was itself more 3.2% more than the three months to September, which was itself 3.5% more than the three months before that.</p>
<p>It’s growth of more than 8%, described by Treasurer Josh Frydenberg as the most over three quarters since 1968. </p>
<p>But it followed a collapse in gross domestic product of 7% – by far the worst since the Bureau of Statistics began compiling records in 1959.</p>
<p>The net result over the year to March growth of 1.1%, an extraordinary result which means that, at least until Victoria’s (just extended) lockdown, we were producing, earning and spending more than before the COVID recession. </p>
<p>On the graph it’s not much more, not the two or so per cent of normal growth the Reserve Bank had been expecting before the recession, but it means that almost alone among developed nations (along with South Korea and probably New Zealand whose figures aren’t yet out) we are better off after the COVID recession than before it.</p>
<hr>
<p><strong>Australian quarterly gross domestic product</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/403913/original/file-20210602-23-1w84848.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/403913/original/file-20210602-23-1w84848.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/403913/original/file-20210602-23-1w84848.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/403913/original/file-20210602-23-1w84848.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/403913/original/file-20210602-23-1w84848.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/403913/original/file-20210602-23-1w84848.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/403913/original/file-20210602-23-1w84848.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/403913/original/file-20210602-23-1w84848.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Chain volume measures, seasonally adjusted.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/mar-2021">ABS</a></span>
</figcaption>
</figure>
<hr>
<p>And we are better off than that bald GDP figures suggest. </p>
<p>In accordance with what is normally good statistical practice those figures are adjusted down for upward movements in prices. </p>
<p>We’ve had a monster upward movement in the price of iron ore over the past year which has enriched Australians through channels including company profits, tax revenue and a higher dollar that aren’t fully reflected in gross domestic product.</p>
<p>That’s why the bureau publishes a separate measure that measures buying power called real national disposable income per capita. </p>
<p>The graph shows it has climbed well above where it was to a new record high.</p>
<p>We ended the recession with 5.8% more buying power than before it began.</p>
<hr>
<p><strong>Real national disposable income per capita</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/403910/original/file-20210602-17-1nzleer.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/403910/original/file-20210602-17-1nzleer.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/403910/original/file-20210602-17-1nzleer.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/403910/original/file-20210602-17-1nzleer.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/403910/original/file-20210602-17-1nzleer.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/403910/original/file-20210602-17-1nzleer.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/403910/original/file-20210602-17-1nzleer.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/403910/original/file-20210602-17-1nzleer.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Chain volume measures, seasonally adjusted.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/mar-2021">ABS</a></span>
</figcaption>
</figure>
<hr>
<p>But we’ve been reluctant to fully use that buying power.</p>
<p>While consumer spending has bounced back to where it was before the recession, in terms of what it buys it is no higher. </p>
<p>In March 2021 we were buying no more than we were in March 2020 — more goods, less services, and more essential items, fewer discretionary items, but no more than we did a year earlier. </p>
<p>Zero growth in buying at a time of substantial growth in buying power can be seen as either disturbing, a sign of understandable caution, or a sign that the best is yet to come.</p>
<hr>
<p><strong>Household final consumption expenditure</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/403920/original/file-20210602-21-17aa916.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/403920/original/file-20210602-21-17aa916.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/403920/original/file-20210602-21-17aa916.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/403920/original/file-20210602-21-17aa916.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/403920/original/file-20210602-21-17aa916.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/403920/original/file-20210602-21-17aa916.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/403920/original/file-20210602-21-17aa916.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/403920/original/file-20210602-21-17aa916.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Chain volume measures, seasonally adjusted.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/mar-2021">ABS</a></span>
</figcaption>
</figure>
<hr>
<p>At his press conference Frydenberg painted the caution to date as something that would support economic growth in the months to come as we unwind our record-high household saving rate. </p>
<p>But the unwinding slowed in the three months to March. </p>
<p>In the December quarter the saving rate plunged from 18.6% of after tax income to 12.2%. Before that it had plunged from the record-high 22% to 18.6%.</p>
<p>But in the March quarter it barely fell, inching down from 12.2% to 11.6%, perhaps reflecting the imminent end of JobSeeker and the coronavirus supplement.</p>
<hr>
<p><strong>Household saving ratio</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/403923/original/file-20210602-27-1u0oort.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/403923/original/file-20210602-27-1u0oort.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/403923/original/file-20210602-27-1u0oort.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/403923/original/file-20210602-27-1u0oort.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/403923/original/file-20210602-27-1u0oort.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/403923/original/file-20210602-27-1u0oort.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/403923/original/file-20210602-27-1u0oort.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/403923/original/file-20210602-27-1u0oort.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Ratio of saving to net-of-tax income, seasonally adjusted.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/mar-2021">ABS</a></span>
</figcaption>
</figure>
<hr>
<p>The subsequent spread of coronavirus in Victoria, and the <a href="https://www.abc.net.au/news/2021-06-02/federal-government-denying-victorian-covid-lockdown-jobkeeper/100184670">reluctance</a> to date of the federal government to reinstate JobKeeper in Victoria will give Australians to keep saving rather than spending their money for some time to come.</p>
<p>Frydenberg told the national accounts press conference he was open to further assistance of another kind and would speak to Victoria’s Treasurer as soon as he could.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/frydenberg-spends-the-bounty-to-drive-unemployment-to-new-lows-159229">Frydenberg spends the bounty to drive unemployment to new lows</a>
</strong>
</em>
</p>
<hr>
<p>Business investment in buildings and equipment surged 5.3% in the March quarter (enough to account for nearly all of the economic growth over the past year) aided by investment incentives which were renewed in the May budget.</p>
<p>Australia’s rigorous approach to compiling the national accounts means the ones released Wednesday are out of date. </p>
<p>Although much will have improved since then, the spread of coronavirus and the lockdown in Victoria means much is suddenly worse. </p>
<p>Our future is about as uncertain as it has ever been.</p><img src="https://counter.theconversation.com/content/161981/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Martin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Things looked good, although we were still cautious at the end of March. Our national accounts are prepared with a lag.Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1616552021-05-27T06:30:34Z2021-05-27T06:30:34ZBounce-back in investment holds open possibility of good news<figure><img src="https://images.theconversation.com/files/403081/original/file-20210527-20-n10uxq.jpg?ixlib=rb-1.1.0&rect=193%2C203%2C3082%2C1377&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Blue Planet Studio/Shutterstock</span></span></figcaption></figure><p>Private business investment is one of the key drivers of economic growth.</p>
<p>Business investment in equipment (and even in buildings) drives productivity, which the Nobel Prize winning economist Paul Krugman famously observed </p>
<blockquote>
<p>isn’t everything, but in the long run it is almost everything</p>
</blockquote>
<p>As he put it, a country’s ability to improve its standard of living over time “depends almost entirely on its ability to raise its output per worker”.</p>
<p>Which is why one of the forecasts in this month’s budget stood out.</p>
<p>The budget forecast non-mining business investment to grow 1.5% in the coming 2021-22 financial year, after falling last year and then to jump a huge <a href="https://theconversation.com/budget-2021-the-floppy-v-shaped-recovery-159230">12.5%</a> during 2022-23.</p>
<p>Thursday’s <a href="https://www.abs.gov.au/statistics/economy/business-indicators/private-new-capital-expenditure-and-expected-expenditure-australia/mar-2021">capital expenditure figures</a> released by the Bureau of Statistics are important not only because they tell us what private firms <em>have</em> been spending on plant and equipment and buildings and structures, but also what they are <em>planning</em> to spend in the months and years ahead.</p>
<h2>The survey that points to the future</h2>
<p>Economists like me are pretty sceptical of surveys. </p>
<p>We like to see what people actually do (so-called “revealed preference”), rather than what they say they intend to do (“stated preference”).</p>
<p>But the bureau has a decent track record with this survey. In part that’s because the people surveyed are the chief financial officers of the major firms. They tend to report what they know is in train rather than “spin” grander visions.</p>
<p>And they usually understate what eventually happens.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/budget-2021-the-floppy-v-shaped-recovery-159230">Budget 2021: the floppy-V-shaped recovery</a>
</strong>
</em>
</p>
<hr>
<p>On what has actually happened, their reports suggest that private non-mining business investment bounced back 7.1% in the first three months of this year.</p>
<p>In the six months to March (since September) it jumped 13.8%, after falling 11.4% in the previous six months of COVID restrictions leading up to September.</p>
<hr>
<p><strong>Quarterly non-mining private capital expenditure</strong></p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/403071/original/file-20210527-13-wge3s0.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/403071/original/file-20210527-13-wge3s0.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=233&fit=crop&dpr=1 600w, https://images.theconversation.com/files/403071/original/file-20210527-13-wge3s0.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=233&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/403071/original/file-20210527-13-wge3s0.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=233&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/403071/original/file-20210527-13-wge3s0.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=293&fit=crop&dpr=1 754w, https://images.theconversation.com/files/403071/original/file-20210527-13-wge3s0.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=293&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/403071/original/file-20210527-13-wge3s0.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=293&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/business-indicators/private-new-capital-expenditure-and-expected-expenditure-australia/mar-2021">ABS Private New Capital Expenditure and Expected Expenditure, Australia</a></span>
</figcaption>
</figure>
<hr>
<p>When it comes to what lies ahead, the estimates for 2021-22 are picking up.</p>
<p>The March estimate is up 11.3% from the estimate made in December.</p>
<p>It is still well down on the latest estimate for 2020-21, about 13% down. But actual non-mining investment is usually somewhere between 30% and 50% higher than what’s expected (the bureau calculates “realisation ratios”) meaning there’s a good chance it will meet the budget forecast for 2021-22.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/vital-signs-wages-growth-desultory-unemployment-stunning-161099">Vital Signs: wages growth desultory, unemployment stunning</a>
</strong>
</em>
</p>
<hr>
<p>Whether it will make it over the much larger bar of the 12.5% increase forecast for 2022-23 is an open question.</p>
<p>The point is, the figures published on Thursday give us no reason for thinking it couldn’t. The Bureau of Statistics has left open the possibility of very good news.</p>
<p>The bounce-back in investment exceeds market expectations. </p>
<h2>Better, and better than expected</h2>
<p><a href="https://markets.jpmorgan.com/research/email/-v2hkjsh/zP-HG_wjZRrHWfEpMAaEGA/GPS-3758131-0">JP Morgan</a> reports that the consensus of forecasts was for an overall increase in investment (mining and non-mining) of 2% in the March quarter. We got 6.3%.</p>
<p>It matters because it tells us businesses are feeling optimistic about the future — optimistic enough to expand, notwithstanding everpresent uncertainties.</p>
<p>We don’t know when our international borders will reopen. We don’t know how long Melbourne’s newest lockdown will last. We don’t know whether enough Australians will be vaccinated to reach herd immunity.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/exclusive-top-economists-back-unemployment-rate-beginning-with-4-159989">Exclusive. Top economists back unemployment rate beginning with '4'</a>
</strong>
</em>
</p>
<hr>
<p>And the results also matter because more business investment will be needed if we are to drive unemployment down to the government’s new (<a href="https://theconversation.com/exclusive-top-economists-back-budget-push-for-an-unemployment-rate-beginning-with-4-159989">and welcome</a>) target of somewhere below 5%.</p>
<p>The extra jobs will have to come from enterprises employing more people. They won’t do it unless they think it is worthwhile to invest.</p><img src="https://counter.theconversation.com/content/161655/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Holden is President-elect of the Academy of the Social Sciences in Australia.</span></em></p>Businesses won’t employ more people unless they are prepared to invest. Figures out on Thursday suggest they are.Richard Holden, Professor of Economics, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1565752021-03-05T03:18:25Z2021-03-05T03:18:25ZVIDEO: Michelle Grattan on the royal commission into aged care, Christian Porter and Linda Reynolds<p>University of Canberra Professorial Fellow Michelle Grattan and Director of the Institute for Governance & Policy Analysis Dr Laine Dare discuss the week in politics.</p>
<p>This week the pair discuss some of the 148 recommendations made by the Royal Commission into Aged Care, including the likelihood and feasibility of their adoption. Also discussed, the allegations against Christian Porter, the national accounts figures released on Wednesday, and Linda Reynold’s political future.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/KtWHQOUidaE?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
</figure><img src="https://counter.theconversation.com/content/156575/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>University of Canberra Professorial Fellow Michelle Grattan and Director of the Institute for Governance & Policy Analysis, Dr Laine Dare discuss the week in politics.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1563722021-03-03T07:48:38Z2021-03-03T07:48:38ZGDP is V-shaped, but not yet good. These three graphs tell the story<p>There’s one graph that sums up both the good and not-yet-as-good detailed by Treasurer Josh Frydenberg at Wednesday’s <a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">national accounts</a> press conference.</p>
<p>It’s a graph of the level of Australia’s gross domestic product – how much is produced and earned each three months in Australia – adjusted for inflation.</p>
<hr>
<p><strong>Australian quarterly gross domestic product</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/387442/original/file-20210303-19-xibns7.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/387442/original/file-20210303-19-xibns7.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/387442/original/file-20210303-19-xibns7.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/387442/original/file-20210303-19-xibns7.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/387442/original/file-20210303-19-xibns7.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/387442/original/file-20210303-19-xibns7.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/387442/original/file-20210303-19-xibns7.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/387442/original/file-20210303-19-xibns7.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Chain volume measures, seasonally adjusted.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">ABS</a></span>
</figcaption>
</figure>
<hr>
<p>It shows Australia’s economy getting bigger and bigger over almost all the past 80 years with only two readily-apparent slowdowns; one in the early 1980s recession, and one in the early 1990s recession.</p>
<p>Until COVID. Last year’s recession wasn’t a slowdown like the other two – it was a collapse, so big you could see it on any scale, even one that went back to when modern records began.</p>
<p>And it was V-shaped.</p>
<p>As soon as the economy collapsed – by 7% in the three months to June, the most since the Great Depression - it bounced back 3.4% in the three months that followed and (we now know) a further 3.1% in the three months that followed that.</p>
<h2>It’s actually more like the beginning of a V</h2>
<p>But, as I suggested <a href="https://theconversation.com/it-isnt-right-to-say-we-are-out-of-recession-as-these-six-graphs-demonstrate-151210">last time</a> (and as the graph shows) the gain of 3.1% and the gain of 3.4% don’t anything like offset the dive of 7% because a percentage increase in a small number does less than a percentage dive in a bigger number. </p>
<p>It’s reasonable to think that population-fuelled GDP is irrelevant to our lives, that what matters is GDP per head - the amount earned per person.</p>
<p>It shows much the same pattern: a V so clear you can see it on the widest possible scale, which is the one I have presented:</p>
<hr>
<p><strong>Per capita quarterly GDP</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/387441/original/file-20210303-22-1ulplvn.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/387441/original/file-20210303-22-1ulplvn.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/387441/original/file-20210303-22-1ulplvn.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/387441/original/file-20210303-22-1ulplvn.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/387441/original/file-20210303-22-1ulplvn.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/387441/original/file-20210303-22-1ulplvn.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/387441/original/file-20210303-22-1ulplvn.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/387441/original/file-20210303-22-1ulplvn.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Chain volume measures, seasonally adjusted.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">ABS</a></span>
</figcaption>
</figure>
<hr>
<p>The economy is 1.1% smaller than it was at the start of last year and 3.3% smaller than it would have been had economic growth continued, an extraordinarily good outcome given what Frydenberg described as the “economic abyss” forecast just five months ago in the October 2020 <a href="https://theconversation.com/budget-2020-promising-tax-breaks-but-relying-on-hope-147012">budget</a>.</p>
<h2>Government support has turned into private spending</h2>
<p>Driving the recovery has been a continuing rebound in consumer spending. It dived 12.3% in the June quarter, climbed 7.9% in the September quarter and in the three months to December when Victorians became freer to spend, a further 4.3%.</p>
<p>We’ve funded it in part by cutting what had been an extraordinarily high household saving ratio. </p>
<p>Household saving has slid from a record high 20% of net-of-tax income in the June quarter to a more welcome 12% in the December quarter.</p>
<hr>
<p><strong>Household saving ratio</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/387440/original/file-20210303-13-74789c.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/387440/original/file-20210303-13-74789c.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/387440/original/file-20210303-13-74789c.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/387440/original/file-20210303-13-74789c.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/387440/original/file-20210303-13-74789c.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/387440/original/file-20210303-13-74789c.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/387440/original/file-20210303-13-74789c.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/387440/original/file-20210303-13-74789c.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Ratio of saving to net-of-tax income, seasonally adjusted.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">ABS</a></span>
</figcaption>
</figure>
<hr>
<p>Unable to spend much on travel, we are spending on the things we can. In the three months to December our spending on motor vehicles jumped a dizzying 31.8%, putting it up 22.2% over the year. </p>
<p>Our spending in hotels, cafes and restaurants rebounded 17.5% in the months to December, although with overseas and much interstate travel restricted, it was still down 29.8% over the year.</p>
<p>With the help of low interest rates and incentives, housing investment climbed 4.1% in the quarter (<a href="https://treasury.gov.au/coronavirus/homebuilder">Homebuilder</a>) and business investment in plant and equipment climbed 8.9% (<a href="https://www.ato.gov.au/Business/Depreciation-and-capital-expenses-and-allowances/Simpler-depreciation-for-small-business/Instant-asset-write-off/">instant asset write-off</a>).</p>
<h2>There are no guarantees</h2>
<p>Farm production soared an astounding 26.8% in the quarter – the biggest jump since 2008 – on the back of the second-best winter crop on record.</p>
<p>If the economy continues to recover at this pace and the “V” turns into an upward tick we will make big inroads into unemployment and the coronavirus recession will look like a blip, an aberration.</p>
<p>But there are no guarantees. The JobKeeper employment subsidy ends on March 28 and the sharp upticks in business investment and farm production are unlikely to continue.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/josh-frydenberg-has-the-opportunity-to-transform-australia-permanently-lowering-unemployment-156175">Josh Frydenberg has the opportunity to transform Australia, permanently lowering unemployment</a>
</strong>
</em>
</p>
<hr>
<p>Much will depend on the May budget, which comes out before the next update. </p>
<p>Among the budget decisions that will matter are how it will deal with the funding requirements of the aged care royal commission, whether and how it proceeds with the legislated increases in compulsory superannuation, and how quickly and to what extent it withdraws support from the economy. </p>
<p>There’s <a href="https://theconversation.com/josh-frydenberg-has-the-opportunity-to-transform-australia-permanently-lowering-unemployment-156175">a case</a> for keeping support high in order to extend the rebound in GDP and make big inroads into unemployment right up until the point we return to meaningful inflation. There’s a case for going for growth.</p><img src="https://counter.theconversation.com/content/156372/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Martin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Economic activity has returned to almost what it was before the crisis, but to nowhere near were it would have been were it not for the crisis.Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1514712020-12-04T01:22:09Z2020-12-04T01:22:09ZVIDEO: Michelle Grattan on the difficult bilateral relationship between Australia and China<p>University of Canberra Professorial Fellow Michelle Grattan and University of Canberra Vice-Chancellor and President Professor Paddy Nixon discuss the week in politics.</p>
<p>This week Michelle and Paddy discuss the bilateral relationship between Australia and China, including a ‘repugnant’ tweet from a Chinese government official, Scott Morrison’s response, and China’s demand that Australia take steps to fix the relationship. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/csrK_QE7HRQ?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
</figure><img src="https://counter.theconversation.com/content/151471/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Michelle Grattan discusses the political week that was with Professor Paddy NixonMichelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1512102020-12-02T06:58:14Z2020-12-02T06:58:14ZIt isn’t right to say we are out of recession, as these six graphs demonstrate<figure><img src="https://images.theconversation.com/files/372197/original/file-20201201-12-1gtrecy.jpg?ixlib=rb-1.1.0&rect=41%2C59%2C2578%2C1179&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Lukas Coch/AAP</span></span></figcaption></figure><p>It’d be wrong to say that we are out of recession, although that’s how the graph of Wednesday’s GDP numbers makes it look.</p>
<p>Gross domestic product (the measure of everything produced and earned and spent) fell 7% between the March and June quarters after slipping 0.3% between the December and March quarters, and then rebounded <a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/sep-2020">3.3%</a> between the June and September quarters.</p>
<p>It was the biggest bounce since 1976, after the biggest fall on record.</p>
<hr>
<p><strong>Quarterly percentage change in gross domestic product</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/372418/original/file-20201202-19-1i4do3u.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/372418/original/file-20201202-19-1i4do3u.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/372418/original/file-20201202-19-1i4do3u.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=307&fit=crop&dpr=1 600w, https://images.theconversation.com/files/372418/original/file-20201202-19-1i4do3u.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=307&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/372418/original/file-20201202-19-1i4do3u.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=307&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/372418/original/file-20201202-19-1i4do3u.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=386&fit=crop&dpr=1 754w, https://images.theconversation.com/files/372418/original/file-20201202-19-1i4do3u.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=386&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/372418/original/file-20201202-19-1i4do3u.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=386&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/sep-2020">ABS National Accounts</a></span>
</figcaption>
</figure>
<hr>
<p>But it hasn’t anything like got us back to where we were. </p>
<p>When the levels rather than the changes in GDP are graphed, it is clear that, as Treasurer Josh Frydenberg put it, we have “a lot of ground to make up”.</p>
<hr>
<p><strong>Quarterly real gross domestic product</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/372420/original/file-20201202-19-1k7b4oj.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/372420/original/file-20201202-19-1k7b4oj.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/372420/original/file-20201202-19-1k7b4oj.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=307&fit=crop&dpr=1 600w, https://images.theconversation.com/files/372420/original/file-20201202-19-1k7b4oj.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=307&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/372420/original/file-20201202-19-1k7b4oj.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=307&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/372420/original/file-20201202-19-1k7b4oj.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=386&fit=crop&dpr=1 754w, https://images.theconversation.com/files/372420/original/file-20201202-19-1k7b4oj.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=386&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/372420/original/file-20201202-19-1k7b4oj.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=386&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/sep-2020">ABS National Accounts</a></span>
</figcaption>
</figure>
<hr>
<p>At first sight the graph of quarterly gross domestic product looks odd. Surely if GDP fell 7% and then rebounded by half that much it should have got back half its losses.</p>
<p>But 3.3% of a small number is much less than 7% of a bigger number. We’ve regained only two fifths of what we lost. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/6-things-to-watch-for-as-australia-crawls-out-of-recession-148797">6 things to watch for as Australia crawls out of recession</a>
</strong>
</em>
</p>
<hr>
<p>And we’ve lost more than that. Had the economy grown as the Reserve Bank <a href="https://www.rba.gov.au/publications/smp/2019/nov/pdf/forecast-table-2019-11.pdf">forecast before the coronavirus crisis</a>, we would have spent and earned A$509 billion in the September quarter instead of $476 billion.</p>
<h2>It’s consumer spending that’s bounced</h2>
<p>What drove the bounce was a rebound in consumer spending after months in which we were confined to quarters, and here the news is better than it seems.</p>
<hr>
<p><strong>Quarterly change in household final consumption expenditure</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/372424/original/file-20201202-20-1rog5n6.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/372424/original/file-20201202-20-1rog5n6.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/372424/original/file-20201202-20-1rog5n6.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/372424/original/file-20201202-20-1rog5n6.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/372424/original/file-20201202-20-1rog5n6.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/372424/original/file-20201202-20-1rog5n6.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/372424/original/file-20201202-20-1rog5n6.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/372424/original/file-20201202-20-1rog5n6.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/sep-2020">ABS Australian National Accounts</a></span>
</figcaption>
</figure>
<hr>
<p>Nationwide, household spending jumped 7.9% after falling 12.5%, but excluding locked-down Victoria (which will have its own delayed bounceback) household spending in the rest of the country rebounded 11% after falling 12%.</p>
<p>And it bounced back in exactly the places it collapsed while we were locked down; in services such as tourism and hospitality.</p>
<hr>
<p><strong>Household spending by category</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/372453/original/file-20201202-12-1tlrjj2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/372453/original/file-20201202-12-1tlrjj2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/372453/original/file-20201202-12-1tlrjj2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=367&fit=crop&dpr=1 600w, https://images.theconversation.com/files/372453/original/file-20201202-12-1tlrjj2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=367&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/372453/original/file-20201202-12-1tlrjj2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=367&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/372453/original/file-20201202-12-1tlrjj2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=461&fit=crop&dpr=1 754w, https://images.theconversation.com/files/372453/original/file-20201202-12-1tlrjj2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=461&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/372453/original/file-20201202-12-1tlrjj2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=461&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">National, percentage change between June quarter and September quarter.</span>
<span class="attribution"><span class="source">Australian Treasury</span></span>
</figcaption>
</figure>
<hr>
<p>Victoria’s economy literally went backwards. </p>
<p>Spending in Victoria continued to fall while spending everywhere else bounced back.</p>
<p>In only one category, home alcohol consumption, did spending in Victoria advance while spending in other places retreated.</p>
<hr>
<p><strong>State and territory final demand, September quarter</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/372465/original/file-20201202-13-ofjf20.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/372465/original/file-20201202-13-ofjf20.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/372465/original/file-20201202-13-ofjf20.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=405&fit=crop&dpr=1 600w, https://images.theconversation.com/files/372465/original/file-20201202-13-ofjf20.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=405&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/372465/original/file-20201202-13-ofjf20.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=405&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/372465/original/file-20201202-13-ofjf20.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=509&fit=crop&dpr=1 754w, https://images.theconversation.com/files/372465/original/file-20201202-13-ofjf20.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=509&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/372465/original/file-20201202-13-ofjf20.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=509&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/sep-2020">ABS Australian National Accounts</a></span>
</figcaption>
</figure>
<hr>
<p>Consumers financed the extra spending by saving less, but even so, Australia’s household saving ratio remained alarmingly high.</p>
<p>In the June quarter Australian households saved a record (upwardly revised) 22.1% of what they earned. In the September quarter that fell to 18.9%, which is still far too high. </p>
<p>In good times, less-worried Australians save less than half that. </p>
<hr>
<p><strong>Household saving ratio</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/372425/original/file-20201202-13-hr8nzu.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/372425/original/file-20201202-13-hr8nzu.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/372425/original/file-20201202-13-hr8nzu.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=307&fit=crop&dpr=1 600w, https://images.theconversation.com/files/372425/original/file-20201202-13-hr8nzu.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=307&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/372425/original/file-20201202-13-hr8nzu.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=307&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/372425/original/file-20201202-13-hr8nzu.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=386&fit=crop&dpr=1 754w, https://images.theconversation.com/files/372425/original/file-20201202-13-hr8nzu.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=386&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/372425/original/file-20201202-13-hr8nzu.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=386&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/sep-2020">ABS Australian National Accounts</a></span>
</figcaption>
</figure>
<hr>
<p>Frydenberg put the best spin he could on the extraordinarily high amount of saving by saying it would provide “ongoing support for the economic recovery in the new year as confidence continues to build”.</p>
<p>Australia was as well positioned to recover as “any nation on earth”. Over the past year its economy has contracted less than Britain, France, Germany and Japan.</p>
<h2>Exports, business investment continue to fall</h2>
<p>Much of that success is due to Australia’s achievement in getting on top of the virus and the success of <a href="https://theconversation.com/the-key-to-the-success-of-the-130-billion-wage-subsidy-is-retrospective-paid-work-135042">JobKeeper</a> in keeping Australians in work until conditions improved. The Reserve Bank believes it saved <a href="https://www.rba.gov.au/publications/rdp/2020/2020-07.html">700,000 jobs</a>.</p>
<p>Working against that has been the forth consecutive quarterly fall in export income (something set to <a href="https://theconversation.com/an-all-out-trade-war-with-china-would-cost-australia-6-of-gdp-151070">worsen</a> unless relations with China improve) and the sixth consecutive fall in business investment.</p>
<p>In a quarter when consumer spending recovered, non-mining business investment fell a further 3% on top of a fall of 8.6% in the previous quarter.</p>
<p>The US <a href="https://theconversation.com/our-needlessly-precise-definition-of-a-recession-is-causing-us-needless-trouble-133694">National Bureau of Economic Research</a> defines a recession as</p>
<blockquote>
<p>a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production and wholesale-retail sales</p>
</blockquote>
<p>On that basis Australia is still in one. Employment, income and production remain well down on where they were a year ago. GDP is down <a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/sep-2020">3.8%</a> on where it was a year ago.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/372490/original/file-20201202-16-7hm60g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/372490/original/file-20201202-16-7hm60g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/372490/original/file-20201202-16-7hm60g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=971&fit=crop&dpr=1 600w, https://images.theconversation.com/files/372490/original/file-20201202-16-7hm60g.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=971&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/372490/original/file-20201202-16-7hm60g.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=971&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/372490/original/file-20201202-16-7hm60g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1220&fit=crop&dpr=1 754w, https://images.theconversation.com/files/372490/original/file-20201202-16-7hm60g.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1220&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/372490/original/file-20201202-16-7hm60g.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1220&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Reserve Bank Governor Philip Lowe.</span>
<span class="attribution"><span class="source">MICK TSIKAS/AAP</span></span>
</figcaption>
</figure>
<p>Speaking as the national accounts were being released, Reserve Bank Governor Philip Lowe said he expected Australia’s unemployment rate to remain above 6% for the next two years. </p>
<p>Annual wage growth would remain <a href="https://www.rba.gov.au/speeches/2020/sp-gov-2020-12-02.html">less than 2%</a></p>
<p>It was possible the economy could do better.</p>
<p>His forecasts assume no widespread vaccination against coronavirus until late next year. They also assume international travel restrictions until 2022.</p>
<p>But it was also possible things could be worse. </p>
<p>Just three months ago many were hailing a robust bounce-back in Europe. </p>
<p>Now, Europe’s economy is expected to sink again in the December quarter as member states struggle to contain the virus. </p>
<p>Australia was on a different path, but there was “no guarantee we will remain so”.</p><img src="https://counter.theconversation.com/content/151210/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Martin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Our economy remains far weaker than it was a year ago and far weaker than it would have been had spending not collapsed.Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1487972020-12-02T00:41:13Z2020-12-02T00:41:13Z6 things to watch for as Australia crawls out of recession<figure><img src="https://images.theconversation.com/files/372129/original/file-20201201-21-4qu1ml.jpg?ixlib=rb-1.1.0&rect=54%2C387%2C2881%2C1287&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Sergey Tinyakov/Shutterstock</span></span></figcaption></figure><p>Our economy has <a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">grown</a> in the September quarter (the three months to September) after two quarters of going backwards.</p>
<p>Using the literal meaning of <a href="https://www.dictionary.com/browse/recession">recession</a>, we are no longer in one – economic output (the things we produce and consume) is no longer be going backwards.</p>
<p>But things won’t be like they were. Even a rebound in gross domestic product of <a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/sep-2020">3.3%</a> (the biggest in 40 years) doesn’t make up for the 7% we lost in the previous quarter, meaning we’ll remain worse off than we were at the start of the year and much worse off than we would have been had the pandemic not happened.</p>
<p>Here are six things to expect as the economy recovers:</p>
<h2>1. Consumer spending will recover first, but might need help</h2>
<p>Consumer spending will to return to normal first, as <a href="https://budget.gov.au/2020-21/content/bp1/download/bp1_bs2.pdf">forecast in the budget</a>. </p>
<p>(Don’t be fooled by the forecast decline of 1.5% for 2020-21 compared to 2019-20. From where we stood in the June quarter 2020 – an enormous decline of 12% on the March quarter – this is a massive recovery.)</p>
<p>So far the signs are promising, but in part this might be because the stimulus payments are still flowing, keeping household disposable income above pre-COVID levels. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/it-isnt-right-to-say-we-are-out-of-recession-as-these-six-graphs-demonstrate-151210">It isn't right to say we are out of recession, as these six graphs demonstrate</a>
</strong>
</em>
</p>
<hr>
<p>The coronavirus supplement that tops up JobKeeper and other benefits (originally A$225 per week) winds down to $75 per week after Christmas and <a href="https://theconversation.com/top-economists-want-jobseeker-boosted-by-100-per-week-and-tied-to-wages-150364">expires on March 31</a>.</p>
<p><a href="https://treasury.gov.au/coronavirus/jobkeeper/extension">JobKeeper</a>, originally $1,500 per fortnight, became harder to get in October and will wind down to $1,000 per fortnight in January and $650 for part-time workers, before expiring on March 31.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/372146/original/file-20201201-15-1uqejhr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/372146/original/file-20201201-15-1uqejhr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/372146/original/file-20201201-15-1uqejhr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=971&fit=crop&dpr=1 600w, https://images.theconversation.com/files/372146/original/file-20201201-15-1uqejhr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=971&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/372146/original/file-20201201-15-1uqejhr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=971&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/372146/original/file-20201201-15-1uqejhr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1220&fit=crop&dpr=1 754w, https://images.theconversation.com/files/372146/original/file-20201201-15-1uqejhr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1220&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/372146/original/file-20201201-15-1uqejhr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1220&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Victoria has funded tutors to assist students left behind.</span>
<span class="attribution"><span class="source">fizkes/Shutterstock</span></span>
</figcaption>
</figure>
<p>Treasury expects wage growth to be slower than price growth for the next two years, so a household-led recovery is by no means guaranteed.</p>
<p>If the recovery stalls in the household sector, activities such as hospitality, retail and arts and entertainment will suffer a second blow and unemployment will remain high. </p>
<p>After the year we’ve had, the household sector could be forgiven for losing confidence. </p>
<p>The government should consider extending the coronavirus supplement payments, and be ready for further one-off stimulus payments if required. </p>
<p>Unlike the imminent income tax cuts, these measures are temporary and can be discontinued as soon as they are no longer required.</p>
<p>Governments can also stimulate demand directly. Victoria has announced an additional <a href="https://education.vic.gov.au/about/careers/teacher/Pages/tutors.aspx">4000 tutors</a> to assist school students left behind after an interrupted year. Other areas in which governments could usefully create meaningful jobs include the care sector and the arts.</p>
<h2>2. Overseas demand won’t assist in the recovery</h2>
<p>Exports face headwinds and are unlikely to recover over the next 18 months.</p>
<p>The International Monetary Fund expects the global economy to shrink by <a href="https://www.imf.org/en/Publications/WEO/Issues/2020/09/30/world-economic-outlook-october-2020">4.4%</a> in 2020 after growing 2.8% in 2019, a turnaround of more than 7%.</p>
<p>This will be apparent in all of Australia’s major customers including China and will depress demand for exports.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/budget-2020-promising-tax-breaks-but-relying-on-hope-147012">Budget 2020: promising tax breaks, but relying on hope</a>
</strong>
</em>
</p>
<hr>
<p>More importantly, travel bans have come close to eliminating “exports” of tourism and education, which together account for almost one fifth of Australian export income.</p>
<p>This income will remain weak until international travel properly restarts. </p>
<h2>3. We will lose four years population growth</h2>
<p>Before the crisis, the 2019 mid-year budget update predicted Australia’s population would grow from 25.6 million to <a href="https://budget.gov.au/2019-20/content/myefo/download/02_Part_2.pdf">28.4 million</a> by June 2026. </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/372156/original/file-20201201-15-uad5u0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/372156/original/file-20201201-15-uad5u0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=971&fit=crop&dpr=1 600w, https://images.theconversation.com/files/372156/original/file-20201201-15-uad5u0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=971&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/372156/original/file-20201201-15-uad5u0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=971&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/372156/original/file-20201201-15-uad5u0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1220&fit=crop&dpr=1 754w, https://images.theconversation.com/files/372156/original/file-20201201-15-uad5u0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1220&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/372156/original/file-20201201-15-uad5u0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1220&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Births and immigration will remain low for years.</span>
<span class="attribution"><span class="source">KieferPix/Shutterstock</span></span>
</figcaption>
</figure>
<p>This year’s budget says we won’t get there until June 2030, a full four years later. </p>
<p>Even after travel resumes, net overseas migration is expected to remain lower than before due to economic uncertainty and weak labour market conditions. </p>
<p>Businesses will find it more difficult to get the staff they need through skilled migration, crating a greater role for higher education and vocational education. </p>
<p>By 2024 migration is assumed to return to normal, yet population growth will continue to be slow. This is because the birth rate is <a href="https://population.gov.au/docs/recent_impacts_on_australias_population_quick%20guide.pdf">projected</a> to be lower than usual for the remainder of the decade. </p>
<h2>4. Business investment will be weaker, and different</h2>
<p>2020 has been a difficult year, but it’s also been the year we’ve learnt to do things differently. </p>
<p>We have learnt about on-line shopping, working from home, telehealth and on-line entertainment, and we will continue to make use of what we have learnt after the pandemic is over. </p>
<p>These changes could drive the next genuine wave of productivity growth. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/covid-19-has-changed-the-future-of-retail-theres-plenty-more-automation-in-store-139025">COVID-19 has changed the future of retail: there's plenty more automation in store</a>
</strong>
</em>
</p>
<hr>
<p>Bricks-and-mortar retail, commercial office space, roads, bridges and railways are all investments that facilitate the meeting and movement of people.</p>
<p>With new technologies and a smaller population that is learning to keep things local, these old-world investments won’t be as generate the same returns as they once might have. </p>
<p>Where we might see the investment dollars being spent is on home improvements, while government investment dollars could be spent on improving local amenities such as parks and community centres.</p>
<h2>5. We’ll need to get more people into paid work</h2>
<p>A year ago, 66% of Australia’s adult population was participating in the labour market, either by being employed or looking for work.</p>
<p>During the crisis the participation rate dipped below 63%. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/372169/original/file-20201201-15-1yd5aam.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/372169/original/file-20201201-15-1yd5aam.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/372169/original/file-20201201-15-1yd5aam.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=971&fit=crop&dpr=1 600w, https://images.theconversation.com/files/372169/original/file-20201201-15-1yd5aam.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=971&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/372169/original/file-20201201-15-1yd5aam.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=971&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/372169/original/file-20201201-15-1yd5aam.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1220&fit=crop&dpr=1 754w, https://images.theconversation.com/files/372169/original/file-20201201-15-1yd5aam.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1220&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/372169/original/file-20201201-15-1yd5aam.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1220&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Australia’s economy could place more emphasis on caring.</span>
<span class="attribution"><span class="source">Toa55/Shutterstock</span></span>
</figcaption>
</figure>
<p>It has since returned to 65.8%, a touch above where the budget expects it will stay.
Other countries including <a href="https://data.oecd.org/emp/labour-force-participation-rate.htm">Canada, Britain, New Zealand and Germany</a> do better than us.</p>
<p>There’s room to get more unpaid carers (many of them women) into the paid workforce.</p>
<p>More than <a href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/barriers-and-incentives-labour-force-participation-australia/latest-release">900,000</a> people who perform significant unpaid caring work say they would like more paid employment.</p>
<p>In my work for the National Foundation for Australian Women, I found the net budgetary cost of increasing caring services was <a href="https://nfaw.org/wp-content/uploads/2020/10/Appendix-A.pdf">modest</a>, mainly because it brought about a strong increase in the tax-paying workforce.</p>
<h2>6. One last dark cloud: the terms of trade</h2>
<p>The terms of trade measure what we can buy for each unit of what we sell; how many imports we can buy for each unit we export.</p>
<p>The budget forecasts a fall of almost 11% in 2021-22 as a result of lower prices for iron ore. </p>
<p>Taking a long view, this may be nothing more than a correction, but it is as big a fall in a single year as we experienced in the <a href="https://www.blackincbooks.com.au/books/dog-days">dog days</a> after the end of mining boom when the terms of trade declined for four consecutive years, and we experienced four years without real growth in income growth per capita. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/an-all-out-trade-war-with-china-would-cost-australia-6-of-gdp-151070">An all-out trade war with China would cost Australia 6% of GDP</a>
</strong>
</em>
</p>
<hr>
<p>Population, participation and productivity are the “three P’s” that drive economic growth in the long run, but in the short run a big decline in the terms of trade poses a <a href="https://theconversation.com/myefo-projections-signal-a-deepening-income-recession-35539">real risk</a> to a household-led economic recovery. </p>
<h2>Where to from here</h2>
<p>In an effort to avoid more economic pain, the government has rightly abandoned fiscal restraint in the most recent budget. </p>
<p>Much of its recovery strategy (perhaps too much) is built around income tax cuts and investment incentives.</p>
<p>I see a need for a greater emphasis on temporary measures aimed at supporting household spending, given the role it will have to play in unwinding the recession.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/modelling-finds-investing-in-childcare-and-aged-care-almost-pays-for-itself-148097">Modelling finds investing in childcare and aged care almost pays for itself</a>
</strong>
</em>
</p>
<hr>
<p>In the longer term, there is a case for paring back some of the larger income tax cuts to expand child care, aged care and disability care; measures that would support low-paid workers, boost labour force participation, and improve the standard of living for many Australians.</p><img src="https://counter.theconversation.com/content/148797/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Janine Dixon does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Without a jump in consumer spending the recovery will be slow, and that’s in doubt.Janine Dixon, Economist at Centre of Policy Studies, Victoria UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1455512020-09-03T08:14:16Z2020-09-03T08:14:16ZPolitics with Michelle Grattan: Chris Bowen on the recession, aged care and priorities for health policy<p>Had the 2019 election panned out differently, Chris Bowen would have been the treasurer coping with Australia’s current economic crisis.</p>
<p>Instead, as shadow health minister, he has been critical of aspects of the government’s handling of the health issues, especially its failure to act earlier and more comprehensively to secure access to potential vaccines.</p>
<p>With Labor homing in on aged care, which has seen the deaths of hundred of residents, Bowen in this podcast questions the performance of the sector’s regulator, the Aged Care Quality and Safety Commission. </p>
<p>“I was frankly shocked by a number of things.</p>
<p>"I was shocked by the fact the regulator was informed by St Basil’s, [that] they had a positive case – and on the face of it, did nothing. I’ve seen no evidence that they actually did anything about it. Their defence is it was somebody else’s job - we had no role to play.</p>
<p>"I just don’t think that cuts the mustard for a regulator. </p>
<p>"I was surprised to learn that ‘no notice’ or very short notice inspections [ by the regulator] had ceased during the pandemic. </p>
<p>"I think these are problematic decisions which the regulator is accountable for, and I do have deep concerns about [them].</p>
<p>"And as a parliamentarian, I am expressing the view that there have been shortcomings [by the regulator] and I’ve yet to see an adequate explanation for those.”</p>
<p><a href="https://itunes.apple.com/au/podcast/politics-with-michelle-grattan/id703425900?mt=2"><img src="https://images.theconversation.com/files/233721/original/file-20180827-75984-1gfuvlr.png" alt="Listen on Apple Podcasts" width="268" height="68"></a> <a href="https://www.google.com/podcasts?feed=aHR0cHM6Ly90aGVjb252ZXJzYXRpb24uY29tL2F1L3BvZGNhc3RzL3BvbGl0aWNzLXdpdGgtbWljaGVsbGUtZ3JhdHRhbi5yc3M"><img src="https://images.theconversation.com/files/233720/original/file-20180827-75978-3mdxcf.png" alt="" width="268" height="68"></a></p>
<p><a href="https://www.stitcher.com/podcast/the-conversation-4/politics-with-michelle-grattan"><img src="https://images.theconversation.com/files/233716/original/file-20180827-75981-pdp50i.png" alt="Stitcher" width="300" height="88"></a> <a href="https://tunein.com/podcasts/News--Politics-Podcasts/Politics-with-Michelle-Grattan-p227852/"><img src="https://images.theconversation.com/files/233723/original/file-20180827-75984-f0y2gb.png" alt="Listen on TuneIn" width="318" height="125"></a></p>
<p><a href="https://radiopublic.com/politics-with-michelle-grattan-WRElBZ"><img class="alignnone size-medium wp-image-152" src="https://images.theconversation.com/files/233717/original/file-20180827-75990-86y5tg.png?ixlib=rb-1.1.0&q=45&auto=format&w=268&fit=clip" alt="Listen on RadioPublic" width="268" height="87"></a> <a href="https://open.spotify.com/show/5NkaSQoUERalaLBQAqUOcC"><img src="https://images.theconversation.com/files/237984/original/file-20180925-149976-1ks72uy.png?ixlib=rb-1.1.0&q=45&auto=format&w=268&fit=clip" width="268" height="82"></a> </p>
<h2>Additional audio</h2>
<p><a href="http://freemusicarchive.org/music/Lee_Rosevere/The_Big_Loop_-_FML_original_podcast_score/Lee_Rosevere_-_The_Big_Loop_-_FML_original_podcast_score_-_10_A_List_of_Ways_to_Die">A List of Ways to Die</a>, Lee Rosevere, from Free Music Archive.</p><img src="https://counter.theconversation.com/content/145551/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Michelle Grattan sits down with shadow health minister Chris BowenMichelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1454452020-09-02T07:12:17Z2020-09-02T07:12:17ZSix graphs that explain Australia’s recession<p>Australia’s recession is the deepest since the Great Depression of the early 1930s.</p>
<p>Nothing else comes close.</p>
<p>The economy shrank an extraordinary 7% in the three months to June – by far the <a href="https://www.abs.gov.au/ausstats/abs@.nsf/mf/5206.0">biggest collapse</a> since the Bureau of Statistics began compiling records in 1959.</p>
<p>The previous worst quarterly outcome was minus 2%, in June 1974.</p>
<hr>
<p><strong>Quarterly percentage change in gross domestic product</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/355951/original/file-20200902-24-w0cau8.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/355951/original/file-20200902-24-w0cau8.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/355951/original/file-20200902-24-w0cau8.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=307&fit=crop&dpr=1 600w, https://images.theconversation.com/files/355951/original/file-20200902-24-w0cau8.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=307&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/355951/original/file-20200902-24-w0cau8.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=307&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/355951/original/file-20200902-24-w0cau8.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=386&fit=crop&dpr=1 754w, https://images.theconversation.com/files/355951/original/file-20200902-24-w0cau8.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=386&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/355951/original/file-20200902-24-w0cau8.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=386&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/ausstats/abs@.nsf/mf/5206.0">ABS National Accounts</a></span>
</figcaption>
</figure>
<hr>
<p>It was going to be worse. </p>
<p>Treasurer Josh Frydenberg told a parliament house press conference that in March his advisers were predicting a collapse three times as big in the June quarter – 20%. In May the forecast was for a June quarter collapse of 10%.</p>
<p>Britain’s economy actually did collapse 20% in the June quarter; the US economy collapsed by nearly 10%.</p>
<p>What staved off a collapse of the order feared was unprecedented government support – more than A$100 billion in JobKeeper and expanded JobSeeker payments alone–enough to actually lift household incomes while 643,000 Australians lost their jobs and many more lost hours.</p>
<hr>
<p><strong>Contribution of government benefits to household income growth</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/355986/original/file-20200902-14-pvzcvx.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/355986/original/file-20200902-14-pvzcvx.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/355986/original/file-20200902-14-pvzcvx.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=357&fit=crop&dpr=1 600w, https://images.theconversation.com/files/355986/original/file-20200902-14-pvzcvx.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=357&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/355986/original/file-20200902-14-pvzcvx.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=357&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/355986/original/file-20200902-14-pvzcvx.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=449&fit=crop&dpr=1 754w, https://images.theconversation.com/files/355986/original/file-20200902-14-pvzcvx.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=449&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/355986/original/file-20200902-14-pvzcvx.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=449&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">Commonwealth Treasury</span></span>
</figcaption>
</figure>
<hr>
<p>A better measure of living standards, so-called “real net national disposable income per capita”, fell nonetheless, by a record 8%.</p>
<hr>
<p><strong>Quarterly percentage change in living standards</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/355958/original/file-20200902-18-p3mavo.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/355958/original/file-20200902-18-p3mavo.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/355958/original/file-20200902-18-p3mavo.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=307&fit=crop&dpr=1 600w, https://images.theconversation.com/files/355958/original/file-20200902-18-p3mavo.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=307&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/355958/original/file-20200902-18-p3mavo.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=307&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/355958/original/file-20200902-18-p3mavo.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=386&fit=crop&dpr=1 754w, https://images.theconversation.com/files/355958/original/file-20200902-18-p3mavo.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=386&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/355958/original/file-20200902-18-p3mavo.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=386&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Quarterly change in real national disposable income per capita.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/ausstats/abs@.nsf/mf/5206.0">ABS Australian National Accounts</a></span>
</figcaption>
</figure>
<hr>
<p>Consumer spending fell by even more, an extraordinary 12.7%, in part because lockdowns and caution in the face of COVID-19 provided fewer opportunities to spend.</p>
<p>Given that consumer spending climbed not at all over the three quarters leading up to the June quarter, it meant that household spending fell over the entire financial year, for the first time since records have been kept. </p>
<hr>
<p><strong>Quarterly change in household final consumption expenditure</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/355963/original/file-20200902-18-19ztdwt.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/355963/original/file-20200902-18-19ztdwt.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/355963/original/file-20200902-18-19ztdwt.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=307&fit=crop&dpr=1 600w, https://images.theconversation.com/files/355963/original/file-20200902-18-19ztdwt.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=307&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/355963/original/file-20200902-18-19ztdwt.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=307&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/355963/original/file-20200902-18-19ztdwt.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=386&fit=crop&dpr=1 754w, https://images.theconversation.com/files/355963/original/file-20200902-18-19ztdwt.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=386&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/355963/original/file-20200902-18-19ztdwt.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=386&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/ausstats/abs@.nsf/mf/5206.0">ABS Australian National Accounts</a></span>
</figcaption>
</figure>
<hr>
<p>Spending on goods was barely hit, while spending on services collapsed 17.6%. </p>
<p>Spending on transport services, a category that encompasses everything from flights to public transport, fell 88%. Spending on accommodation, a category that encompasses tourism, fell 55.7%. </p>
<p>Spending on recreational and cultural services, a category that encompasses sporting events, gambling and performances and cinema admissions, fell 54.5%.</p>
<hr>
<p><strong>Household spending by category</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/355995/original/file-20200902-14-wm2uj5.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/355995/original/file-20200902-14-wm2uj5.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/355995/original/file-20200902-14-wm2uj5.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=363&fit=crop&dpr=1 600w, https://images.theconversation.com/files/355995/original/file-20200902-14-wm2uj5.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=363&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/355995/original/file-20200902-14-wm2uj5.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=363&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/355995/original/file-20200902-14-wm2uj5.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=456&fit=crop&dpr=1 754w, https://images.theconversation.com/files/355995/original/file-20200902-14-wm2uj5.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=456&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/355995/original/file-20200902-14-wm2uj5.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=456&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">Commonwealth Treasury</span></span>
</figcaption>
</figure>
<hr>
<p>It meant far more income than usual was saved. During the depths of the global financial crisis, Australia’s household saving ratio climbed to a peak of 10.9% as households squirrelled away one in every ten dollars they earned. </p>
<p>In June they squirrelled away a remarkable 19.7% – one in five dollars that came in the door.</p>
<hr>
<p><strong>Household saving ratio</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/355997/original/file-20200902-22-yq9rjf.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/355997/original/file-20200902-22-yq9rjf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/355997/original/file-20200902-22-yq9rjf.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=307&fit=crop&dpr=1 600w, https://images.theconversation.com/files/355997/original/file-20200902-22-yq9rjf.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=307&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/355997/original/file-20200902-22-yq9rjf.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=307&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/355997/original/file-20200902-22-yq9rjf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=386&fit=crop&dpr=1 754w, https://images.theconversation.com/files/355997/original/file-20200902-22-yq9rjf.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=386&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/355997/original/file-20200902-22-yq9rjf.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=386&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">ABS Australian National Accounts</span></span>
</figcaption>
</figure>
<hr>
<p>The Bureau of Statistics says if household income from special initiatives including early access to super was included, the household saving ratio would be even higher. What it calls the “household experience saving ratio” would be 24.8%.</p>
<p>It’s possible to see households saving one in every four dollars as a “glass half full”. Frydenberg does.</p>
<p>He says this never-before-experienced accumulation of savings will be useful in the recovery, giving people the capacity to spend big when restrictions ease and they are better able to spend.</p>
<h2>What if we remain unwilling to spend…</h2>
<p>That’s assuming people aren’t “scarred” by the experience, left with damaged psyches and unwilling spend, a possibility the Treasurer acknowledges. </p>
<p>He says for the next quarter, the current one that encompasses the three months to the end of September, the Treasury is expecting economic activity to shrink only a little further or no further at all. </p>
<p>A lot depends on how soon Victoria’s Stage 4 restrictions and other restrictions are eased, which means a lot depends on things that are unknowable.</p>
<h2>…and businesses unwilling to invest?</h2>
<p>The Treasurer will deliver the budget in a little over <a href="https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/2020-21-budget-announcement">four weeks’ time</a>.</p>
<p>He said a key part of it will be measures to make it easier for businesses to do business, unlocking “entrepreneurship and innovation” at low cost.</p>
<p>Businesses certainly could invest more. Non-mining business investment was down 9.3% in the quarter. On Tuesday the Reserve Bank made available an extra $57 billion at low cost for banks to advance businesses and households.</p>
<p>But they are only likely to want to invest more when they can see returns.</p>
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Read more:
<a href="https://theconversation.com/when-it-comes-to-economic-reform-the-old-days-really-were-better-we-checked-145296">When it comes to economic reform, the old days really were better. We checked</a>
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<p>Examining the figures on Wednesday, former Reserve Bank economist Callam Pickering said they showed the economy being held together “with duct tape by JobKeeper and JobSeeker”.</p>
<p>At his press conference, Frydenberg resisted suggestions that he revisit the wind-downs of JobKeeper and the JobSeeker Coronavirus Supplement due to take place over the next six months.</p>
<p>But the Victorian situation is far worse than when he announced the schedule on <a href="https://www.australia.gov.au/jobkeeper-payment-and-coronavirus-supplement-extended">July 21</a>.</p>
<p>He might find there’s a case for more duct tape, for a while longer.</p><img src="https://counter.theconversation.com/content/145445/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Martin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>It’s the worst since the Great Depression and it isn’t clear there’s a path out.Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1398552020-06-03T20:09:17Z2020-06-03T20:09:17ZEconomic snap-back? Not so fast<p>With the virus on the back foot, it’s tempting to declare victory. Provided we stay vigilant on the public health front, we do have a good chance of keeping the pandemic at bay. But there’s another enemy still to defeat.</p>
<p>The public health measures have worked so much better and faster than expected that calls to reign in the economic measures have already begun. The prime minister has said he wants to get the patient <a href="https://theconversation.com/australian-economy-must-come-out-of-icu-scott-morrison-139347">out of the intensive care unit</a> as quickly as possible.</p>
<p>But these calls take for granted an economic snap-back that is far from assured.</p>
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Read more:
<a href="https://theconversation.com/the-economy-in-7-graphs-how-a-tightening-of-wallets-pushed-australia-into-recession-139960">The economy in 7 graphs. How a tightening of wallets pushed Australia into recession</a>
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<p>Last month’s stunning revelation that the JobKeeper wage subsidy will cost <a href="https://theconversation.com/treasury-revises-jobkeepers-cost-down-by-massive-60-billion-sparking-calls-to-widen-eligibility-139231">A$60 billion less than expected</a> has been taken by many as good news. </p>
<p>But this might not be because there is no need for further aid but rather because there are too many <a href="https://theconversation.com/performers-and-sole-traders-find-it-hard-to-get-jobkeeper-in-part-because-they-get-behind-on-their-paperwork-137997">barriers</a> to accessing it, or business owners have decided it is futile.</p>
<p>Even with this underspend, JobKeeper is propping up the wages of a quarter of the workforce. An extra half a million Australians have lost their jobs. While JobKeeper has saved many businesses, still thousands have failed.</p>
<h2>It’ll be a three-step recovery</h2>
<p>Reserve Bank Governor Philip Lowe said last week it would be a <a href="https://parlinfo.aph.gov.au/parlInfo/download/committees/commsen/a3af0917-dc51-4d01-a86f-69153eb93040/toc_pdf/Senate%20Select%20Committee%20on%20COVID-19_2020_05_28_7741.pdf;fileType=application%2Fpdf#search=%22committees/commsen/a3af0917-dc51-4d01-a86f-69153eb93040/0000%22">mistake</a> to withdraw the fiscal stimulus too quickly. </p>
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<p>If the economy picks up more quickly, that can be withdrawn safely, but, if the recovery is very drawn out, then it’s going to be very important that we keep the fiscal support going.</p>
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<p>We see the battle plan for a full recovery progressing through three phases: (i) shutting down the economy until the pandemic is under control, (ii) bringing the economy out of the ensuing deep recession, and (iii) putting the economy back on a strong growth path.</p>
<p>If we’re lucky, we’re nearing the end of phase one.</p>
<h2>We’re ready for step two</h2>
<p>This crisis is unusual. We deliberately engineered an enormous decline in activity in order to achieve the social distancing required to bring the pandemic under control.</p>
<p>During this first phase, conventional stimulus would have been of limited help and could have been counterproductive. We needed tools such as JobKeeper to freeze much of the economy with the hope it would thaw once the pandemic was under control.</p>
<p>The second phase is the more conventional vicious cycle of workers who lose income spending less causing other workers to lose income.</p>
<p>It is best dealt with by fiscal stimulus.</p>
<p>Broad-based cash transfers to households, like those implemented in the <a href="https://www.irs.gov/coronavirus-tax-relief-and-economic-impact-payments">United States</a>, would be a powerful complement to existing measures. They could paper over cracks in JobSeeker and JobKeeper over the coming months, and help prevent any relapse as those schemes expire.</p>
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Read more:
<a href="https://theconversation.com/how-will-the-coronavirus-recession-compare-with-the-worst-in-australias-history-136379">How will the coronavirus recession compare with the worst in Australia's history?</a>
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<p>Economists <a href="https://theconversation.com/vital-signs-the-gfc-and-me-ten-years-on-what-have-we-learned-103514">widely acknowledge</a> the role of the cash stimulus component of the Rudd government’s response to the 2008 global financial crisis in helping Australia avoid recession. The Morrison government could pick the best part of that response while avoiding the less effective parts.</p>
<p>Some worry about heightened levels of <a href="https://www.afr.com/policy/economy/kevin-rudd-did-not-save-the-economy-in-2008-20181015-h16ne3">government debt</a>.</p>
<p>These concerns are unwarranted. Australia went into the crisis with low debt by international standards, and can borrow at historically low fixed interest rates. </p>
<p>It can borrow for ten years at a rate close to 1%, less than the rate of inflation.</p>
<h2>More debt, sooner, can cut debt</h2>
<p>The more successful we are at getting the economy out of recession, the less we’ll spend on programs like JobKeeper and JobSeeker.</p>
<p>Provided we keep the pandemic at bay, the quicker the economy recovers the sooner earnings and taxes will pick up and the sooner the budget will be back in black. </p>
<p>A turn to austerity triggered by debt and deficit concerns of the kind seen in Europe after the global financial crisis could deliver us a <a href="https://www.kansascityfed.org/%7E/media/files/publicat/sympos/2017/auerbach-gorodnichenko-paper.pdf">slower</a> rather than a faster recovery in our debt to GDP ratio.</p>
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Read more:
<a href="https://theconversation.com/memories-in-1961-labor-promised-to-boost-the-deficit-to-fight-unemployment-the-promise-won-115376">Memories. In 1961 Labor promised to boost the deficit to fight unemployment. The promise won</a>
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<p>Phase three in our recovery is the search for programs to increase the <a href="https://www.pc.gov.au/inquiries/completed/productivity-review/report">productive capacity</a> of the economy. They can help make up for lost time, getting the economy back to where it would have been without the crisis. And they can help deflate away the debt.</p>
<p>How best to set our economy up for the decades ahead is an important debate. We look forward to it. </p>
<p>But let’s not get ahead of ourselves. Now is the time to use the best recession-fighting tools we have to get the economy back on the path to recovery.</p><img src="https://counter.theconversation.com/content/139855/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>It’s far too early to declare victory. The need for conventional economic stimulus has just begun.Steven Hamilton, Visiting Fellow, Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National UniversityBruce Preston, Professor of Economics, The University of MelbourneChris Edmond, Professor of Economics, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.