When the March-quarter National Accounts data came out it showed very strong growth which seemed to run counter to the other indicators that were available at the relevant time. My blog – Australian national accounts – strong growth creates a puzzle – focused on the conflict between the poor employment growth and the strong GDP growth. Today – the Australian Bureau of Statistics released the – Australian National Accounts – for the June 2012 quarter and the results make much more sense. The Australian economy slowed in the June quarter and the growth performance was more consistent with the other indicators that we have at our disposable. The latest data available suggests that the slowdown in June has accelerated into the third-quarter but we will have to wait until December to verify that claim. Today’s data release also continues to demonstrate the growth impact of on-going budget deficits even if the Federal Government is doing what it can to undermine that contribution. Without the public sector contribution to real GDP growth, the overall outlook would look very weak.

The ABS released the – Australian National Accounts – today for the March 2012 quarter and the results have stunned all commentators including yours truly. Last quarter, the real GDP growth rate had slumped to 0.6 per cent (this was revised upwards from 0.4 per cent). But in the March 2012 quarter the Australian economy grew by a staggering (fast) 1.3 per cent – driven by both private consumption and private investment are driving growth. For the year, the Australian economy grew by 4.3 per cent which when compared to trend (around 3.25 per cent) suggests a boom. But over the same quarter, employment growth fell by 0.7 per cent and full-time employment fell by 0.2 per cent. That dislocation is very puzzling. There appears to be a divergence occurring between our real output performance and our labour market performance. More analysis is required to fully understand that divergence. Clearly, the data is also indicating that growth can be unbalanced (concentrated in space and particular sectors) which poses policy challenges. For now though, the real GDP growth estimates are good. It is likely we have seen the peak of the investment cycle though (as China slows) and that will have implications for income growth, and, hence, household consumption growth.

Today the ABS released the Australian National Accounts – for the December 2011 quarter which shows that the quarterly real GDP growth rate was 0.4 per cent, down from 0.8 per cent in the September quarter. For the year, the Australian economy grew by 2.3 per cent down which when compared to trend (around 3.25 per cent) reveals how sluggish our recovery after the crisis has been. The worrying sign is that private business investment contracted and offset the growth coming from household consumption, net exports and inventory building. Growth is also being held back by the Government’s obsessive pursuit of a budget surplus in the coming fiscal year. The fiscal drag is damaging output and employment prospects and dampening expectations in the private sector. The growth rate is not strong enough to make a dent in the unemployment and underemployment ranks. The case for continued government support for higher growth remains especially with inflation now falling.

As Summer struggles to makes it appearance on the East Coast (coldest start for something like 40 odd years) the ABS released the Australian National Accounts – for the September 2011 quarter came out today and showed that the Australian economy grew by 1 per cent in the quarter down from the strong 1.2 per cent in June. In real terms, the economy grew 2.5 per cent over the last 12 months which is a good result considering that the March quarter contraction of 0.9 per cent. There are several competing forces contributing to this result. The growth is being driven by private capital formation and household consumption but being dragged down by net exports, harsh government austerity and the run down in inventories, the latter suggesting firms are losing confidence in the immediate outlook. If the private investment boom continues then growth for the foreseeable future should be maintained and approach trend. I would note that the recent (pre-crisis) trend growth was insufficient to mop up both the residual unemployment and the rising underemployment. The case for continued government support for higher growth remains especially with inflation now falling.

A lot of readers write in asking what about external balances – what they mean etc. They are also sometimes puzzled why I say that the external sector in Australia is currently (and typically) draining real growth in the economy when at the same time they read that the terms of trade are at record levels and that we are in the midst of a “once-in-a-hundred-years” mining boom which is reshaping our economy. So today’s release by the ABS of the latest (September quarter 2011) – Balance of Payments and International Investment Position, Australia – provides me with a platform for a brief (I promise) explanation of these concepts and how they might be interpreted from a Modern Monetary Theory (MMT) perspective. The bottom line is that for Australia, our external sector continues to drain growth.

As winter arrived (June 1), the March quarter Australian National Accounts came out and showed that the Australian economy contracted by a staggering 1.2 per cent. With the seasons passing into spring and the warm days are back, the Australian Bureau of Statistics released the National Accounts data for the June 2011 quarter which not only revised last quarter’s result to -0.9 per cent but also showed than in the subsequent three months of this year the Australian economy grew at a robust 1.2 per cent. That means in the last 12 months the economy has grown by 1.4 per cent (a very poor result) but in the second quarter accelerated on the back on household consumption and a strange pickup in inventories. But if the growth continues then I expect some reductions in the unemployment rate by the end of the year – which is a good prospect. The irony is that the external sector continues to drag the growth rate down despite our so-called “once-in-a-hundred-years” mining boom. There are mixed signals in the economy at present though. Remember the National Accounts are a rear-vision view of what was happening in April, May and June. Since then the global economy has gone apoplectic and China is slowing. The most recent Australian data does not accord with the strength indicated in today’s (rear-vision) version of events.

Today, the Australian winter officially begins yet where I am the sun is shining. Not so for the Australian economy though. The Australian Bureau of Statistics released the National Accounts data for the March 2011 quarter which shows that in the first three months of this year the Australian economy contracted by a staggering 1.2 per cent. The result has been dismissed by the Government and many of the commentators as a “one-off” result driven by the extraordinary weather events (floods and cyclones) earlier in 2011. There is some truth in that statement. But overall once we net out the likely effects of the natural disasters the data suggests that the Australian economy is growing modestly – but not strong enough to eat into the pool of idle labour. We have to appreciate that this is a rear-view mirror of what the economy was doing 3 months ago. The contemporary data (flat credit demand, construction, retail sales, employment growth) tells us that the current performance of the Australian economy is very weak. With the contribution from government now negative and the household sector saving ratio rising sharply we are increasingly dependent on the external sector for on-going growth. The fact is that with China introducing contractionary policies there is still some uncertainty ahead on that front notwithstanding the evidence today (terms of trade) that demand for our exports remains strong.

The on-going rhetoric being used to push the federal budget into surplus is that the Australian economy is growing so fast as a result of the mining boom (record commodity prices) that we are in danger of an inflationary break-out. This is at a time when 12.5 per cent of our labour resources are idle (unemployed or underemployed). Today’s Australian Bureau of Statistics release of the National Accounts data for the December quarter shows that the mining sector is making a zero contribution to real GDP growth. Overall, the data shows that the Australian economy grew by 0.7 per cent in the December quarter giving an annual growth of 2.7 per cent. This is not enough to eat into the pool of idle labour given that productivity growth is around 1 per cent per annum and labour force growth is around 1.7 per cent. The zero contribution of private investment is the most disappointing feature of today’s data. But we have to be cautious – this is a rear-view mirror of what the economy was doing 3 months ago. But even so, there is nothing in this data that suggests Australia is facing an inflation problem of too much growth. The growth rate is still not strong enough and with the withdrawal of the fiscal stimulus and China introducing contractionary policies there is still some uncertainty ahead.