National Accounts – William Mitchell

Australian National Accounts – GDP growth slows significantly – slipping towards recession under current policy settings

The Australian Bureau of Statistics released the latest – Australian National Accounts: National Income, Expenditure and Product, March 2025 – today (June 4, 2025), which shows that the Australian economy grew by just 0.2 per cent in the March-quarter 2025 (down from 0.6 per cent) and by just 1.3 per cent over the 12 months. GDP per capita growth was negative -0.2 per cent as output growth was outpaced the underlying population growth. There was a major slowdown in household consumption expenditure growth and the government sector overall contracted. While the overall slowdown led to a decline in import expenditure (which adds to growth), the decline in exports was greater, which means that the external sector detracted from growth overall. The problem is that as the overall growth rate declines, it is getting to the stage where unemployment will start to rise.

May 29, 2025
bill
Economics, Labour costs, Labour Force, National Accounts
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During the recent inflationary episode, the RBA relentlessly pursued the argument that they had to keep hiking interest rates, and then, had to keep them at elevated levels, well beyond any reasonable assessment of the situation, because wage pressures were set to explode. They claimed their business liaison panel was telling them that wages were becoming a problem despite the facts being that nominal wages growth was at record lows and real wages (the purchasing power of the nominal wages) were going backwards at a rate of knots. The RBA massaged that argument by adding that productivity was low and that there was no ‘non-inflationary’ space for wage increases as a result, as if it was the workers’ fault. Yesterday (May 28, 2025), the Productivity Commission (a federal agency that morphed out of the old – Tariff Board – published an interesting research report – Productivity before and after COVID-19 – which lays bare some of the misinformation that the corporate sector has been pumping into the public debate about productivity growth. In particular, it demonstrates that forcing workers to work longer hours undermines productivity growth, that work-from-home is beneficial, and the lack of investment in productive infrastructure by corporations is a major reason for the lagging productivity growth in Australia.

US National Accounts – growth contracts but likely to be temporary

People are closely watching the US data at present to see what the impacts of the recent tariff decisions by the new US President might have. I am no exception. Yesterday (April 30, 2025), the US Bureau of Economic Analysis published the latest US National Accounts figures – Gross Domestic Product, 1st Quarter 2025 (Advance Estimate) – which provides us with the first major data release since the new regime took office. The fact though is that this data cannot tell us much about the tariff decisions, given that Trump’s – Executive Order 14257 – only really became operational on April 4, 2025, although there had been some earlier tariff changes before then.

Australian National Accounts – growth rate picks up on back of government spending support

Today (December 4, 2024), the Australian Bureau of Statistics released the latest – Australian National Accounts: National Income, Expenditure and Product, December 2024 – which shows that the Australian economy grew by just 0.6 per cent in the December-quarter 2024 and by just 1.3 per cent over the 12 months (up from 0.6 per cent). GDP per capita also reversed its sequence of negative results as output growth outpaced the underlying population growth. The only source of expenditure keeping GDP growth positive is coming from government – both recurrent and investment. The largest component of national expenditure – household consumption spending – returned to a positive contribution as did business investment and net exports. But the fact remains that non-government spending is still relatively weak and it is public spending that is keeping the economy from near recession growth rates.

December 4, 2024
bill
National Accounts
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Today (December 4, 2024), the Australian Bureau of Statistics released the latest – Australian National Accounts: National Income, Expenditure and Product, June 2024 – which shows that the Australian economy grew by just 0.3 per cent in the September-quarter 2024 and by just 0.8 per cent over the 12 months (down from 1 per cent). That growth rate is well below the rate required to keep unemployment from rising. GDP per capita fell for the 7th consecutive quarter and was 1.5 per cent down over the year. This is a rough measure of how far material living standards have declined but if we factor in the unequal distribution of income, which is getting worse, then the last 12 months have been very harsh for the bottom end of the distribution. Household consumption expenditure was flat. The only source of expenditure keeping GDP growth positive came from government – both recurrent and investment. However, fiscal policy is not expansionary enough and at the current growth rate, unemployment will rise. Both fiscal and monetary policy are squeezing household expenditure and the contribution of direct government spending, while positive, will not be sufficient to fill the expanding non-government spending gap. At the current growth rate, unemployment will rise. And that will be a deliberate act from our policy makers.

September 4, 2024
bill
National Accounts
1 Comment

Today (September 4, 2024), the Australian Bureau of Statistics released the latest – Australian National Accounts: National Income, Expenditure and Product, June 2024 – which shows that the Australian economy grew by just 0.2 per cent in the June-quarter 2024 and by just 1 per cent over the 12 months (down from 1.5 per cent). If we extend the June-quarter result out over the year then GDP will grow by 0.8 per cent, well below the rate required to keep unemployment from rising. GDP per capita fell for the sixth consecutive quarter and was 1.5 per cent down over the year. This is a rough measure of how far material living standards have declined but if we factor the unequal distribution of income, which is getting worse, then the last 12 months have been very harsh for the bottom end of the distribution. Household consumption expenditure contracted by 0.2 per cent – a sign that the economy is heading into recession. There is now a very real possibility that Australia will enter recession in the coming year unless there is a change of policy direction. Both fiscal and monetary policy are squeezing household expenditure and the contribution of direct government spending, while positive, will not be sufficient to fill the expanding non-government spending gap. At the current growth rate, unemployment will rise. And that will be a deliberate act from our policy makers.

British GDP growth depends on the current fiscal position – a fact that is being forgotten

It seems that since they were elected British Labour, principally the Leader and Chancellor, have thought it necessary to put out ever increasing messages of doom and the need for tough fiscal action – aka austerity – despite them claiming when they were wooing the electorate that they would not pursue that ‘Tory’ option. Of course, they pulled the old stunt that once they were in office and had access to the ‘books’ they discovered, surprise surprise, that the state of government finances were even worse than they had imagined and that meant it was all to play for, which justified them taking tougher than planned actions. Every week passes since, it seems, when the tough talk gets tougher and core promises are abandoned. Tory policies that are the anathema of a progressive policy stance – such as the two-child benefit cap – will remain. And other Tory policies that were more ‘Labour like’ in nature will go – such as the Winter Fuel Payment received subsidy – will be severely cut back. There are many criticisms that I have made of the Chancellor’s stance (see previous blog posts) based on the absurdity of constructing the British government’s finances as equivalent in principle to the finances of a household issue. But, in addition to those more elemental issues, there is another matter that I have not seen addressed by the mainstream media nor the actual politicians relating to the proposed austerity. The whole discussion appears to be waged in a vacuum – context free. It is as if the current policy position, which the Chancellor claims is shocking and unsustainable, is divorced from the current broader economic reality in Britain. And that construction means that poor policy decisions will be made that will damage the material prosperity of the nation.

Australia – GDP growth heads towards zero – then recession if there is no policy shift

Today (June 5, 2024), the Australian Bureau of Statistics released the latest – Australian National Accounts: National Income, Expenditure and Product, March 2024 – which shows that the Australian economy grew by just 0.1 per cent in the March-quarter 2024 and by 1.1 per cent over the 12 months (down from 1.5 per cent). If we extend the March result out over the year then GDP will grow by 0.4 per cent, well below the rate required to keep unemployment from rising. GDP per capita fell for the fifth consecutive quarter and was 1.3 per cent down over the year. This is a rough measure of how far material living standards have declined but if we factor the unequal distribution of income, which is getting worse, then the last 12 months have been very harsh for the bottom end of the distribution. Household consumption expenditure was stable but only because the saving ratio fell further. There is now a very real possibility that Australia will enter recession in the coming year unless there is a change of policy direction. Both fiscal and monetary policy are squeezing household expenditure and the contribution of direct government spending, while positive, will not be sufficient to fill the expanding non-government spending gap. At the current growth rate, unemployment will rise. And that will be a deliberate act from our policy makers.

Australia’s growth rate declines further and danger of recession increases on the back of the policy squeeze

Today (March 6, 2024), the Australian Bureau of Statistics released the latest – Australian National Accounts: National Income, Expenditure and Product, December 2023 – which shows that the Australian economy grew by just 0.2 per cent in the December-quarter 2023 and by 1.5 per cent over the 12 months (down from 2.1 per cent). If we extend the September result out over the year then GDP will grow by 0.8 per cent, well below the rate required to keep unemployment from rising. GDP per capita fell for the third consecutive quarter and was 1 per cent down over the year. This is a rough measure of how far material living standards have declined but if we factor the unequal distribution of income, which is getting worse, then the last 12 months have been very harsh for the bottom end of the distribution. Households cut back further on consumption expenditure growth. Moreover, there is now a very real possibility that Australia will enter recession in the coming year unless there is a change of policy direction. Both fiscal and monetary policy are squeezing household expenditure and the contribution of direct government spending, while positive, will not be sufficient to fill the expanding non-government spending gap. At the current growth rate, unemployment will rise. And that will be a deliberate act from our policy makers.

Japan sinks into recession – but there is more to the story than the mainstream narrative would care to admit

Last week (February 15, 2024), the Japanese Cabinet Office released the latest national accounts estimates for the December-quarter 2023 – Quarterly Estimates of GDP for Oct.-Dec. 2023 (The First preliminary) – which showed that the economy had slipped into an official recession (two consecutive quarters of negative GDP growth) and in the process had moved from being the third largest economy in the world to become the fourth behind the US, China and Germany. According to the media release – 2023年10~12月期四半期別GDP速報 – the quarterly growth rate was -0.1 per cent (annual -0.4 per cent). Domestic demand was weak, contributing -0.3 per cent while net exports contributed +0.2 per cent. Part of the story is related to a ‘valuation drop’ because the yen has depreciated in recent months, undermining the value of exports and increasing the value of imports. But while there is some hysteria in the ‘markets’ and the mainstream economics commentary about the result, caution is required because the data will be revised (it was only preliminary) as more data comes in and it is highly possible for the negative to become a positive. But, I also take a different perspective on this from the dominant narrative in the media as you will see if you read on.

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