Posts in this category focus on National Accounts data publications

Australian National Accounts – 3 months ago the economy was barely moving – it will be worse now

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.

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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.

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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.

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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.

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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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Prosperity of Australian households going south, while Keir Starmer praises Margaret Thatcher

I am covering a few topics today, given that I used yesterday’s post space to analyse the national accounts release. There is a further point I wish to make about the latest national accounts data. A focus on real household disposable income shows the full extent of the impacts of monetary policy (rate hikes) and fiscal policy (tax bracket creep) on household prosperity. The Australian government is overseeing one of the largest falls in household prosperity in recent history aided and abetted by the RBA. And the only thing the Treasurer has announced this week is his intention to alter the RBA Act to rescind his power to change monetary policy if it acts against the national interest. Meanwhile, the British Labour Party leader was out there praising Margaret Thatcher and equating her shock therapy to his own purges within the Labour Party of anything that resembles a progressive voice. After all that, I have some spiritual jazz for our listening pleasure.

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Australian national accounts – growth falls to 0.2 per cent in September – and only because of fiscal support measures

Today (December 6, 2023), the Australian Bureau of Statistics released the latest – Australian National Accounts: National Income, Expenditure and Product, September 2023 – which shows that the Australian economy grew by just 0.2 per cent in the September-quarter 2023 and by 2.1 per cent over the 12 months. 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 by 0.5 per cent and Real net national disposable income fell by 0.6 per cent – a measure of how far material living standards declined. Households cut back further on consumption expenditure growth while at the same time saving less relative to their disposable income in the face of rising interest rates and temporary inflationary pressures. Temporary fiscal policy measures (to ease cost-of-living pressures) were the difference between poor growth and no growth at all.

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US national accounts data – no sign that interest rates are working the way economists think they work

On October 26, 2023, the US Bureau of Economic Analysis published the latest US National Accounts figures – Gross Domestic Product, Third Quarter 2023 (Advance Estimate) – which showed that “Real gross domestic product (GDP) increased at an annual rate of 4.9 percent in the third quarter of 2023”. The June-quarter 2023 growth rate was 2.1 per cent. There was broad-based growth in all the expenditure components, including those that would be most sensitive to interest rate rises. My prior, of course, is that the interest rates would not significantly reduce growth in the short run, whereas mainstream New Keynesian theory considers interest rate rises to be an effective tool in moderating total spending, and, in turn, reducing inflation. The reality does not support the mainstream proposition. Consecutive national accounts releases from the US, however, have shown that aggregate expenditure is resilient in the face of the interest rate increases.

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Australia national accounts – growth continues to be sluggish as material living standards decline

Today (September 6, 2023), the Australian Bureau of Statistics released the latest – Australian National Accounts: National Income, Expenditure and Product, June 2023 – which shows that the Australian economy grew by just 0.4 per cent in the June-quarter 2023 and by 2.1 per cent over the 12 months. If we extend the June 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 by 0.3 per cent and Real net national disposable income fell by 1.4 per cent – a measure of how far material living standards declined. Households cut back further on consumption expenditure while at the same time saving less relative to their disposable income in an effort to maintain consumption growth in the face of rising interest rates and temporary inflationary pressures. The result also shows that the RBA’s attempts to engineer a recession are so far failing which tells us about the ineffectiveness of monetary policy.

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The Ireland growth miracle is largely illusory and biasing Eurozone growth data upwards

I have been avoiding keeping up-to-date with the Irish national accounts over the last several years for reasons that I documented in this blog post – Ireland – not as rosy as the official story might suggest (January 2, 2018). Ireland has been held out as the poster nation for the Eurozone boosters because of its seemingly ‘impressive’ growth performance after entry into the common currency and its resilience after the Global Financial Crisis. During the GFC, I wrote a series of blog posts (see below) that delved into reality of the Irish situation and we learned that the so-called ‘Celtic Tiger’ growth miracle was an illusion and was driven by major US corporations evading US tax liabilities by exploiting massive tax breaks supplied to them by the Irish government. Since then the ‘smoke and mirrors’ have become even more obvious as the Irish national accounts recorded massive increases in business investment all due to fudges in the way several large corporations recorded their tax affairs. I decided recently to see where this was at given the European Commission is still claiming that growth. What I found was that the distortions in the Irish data are influencing the outcomes reported for the European Union as a whole and things are definitely not as robust as the official figures demonstrate.

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