{"id":31037,"date":"2015-05-29T08:14:51","date_gmt":"2015-05-28T22:14:51","guid":{"rendered":"https:\/\/billmitchell.org\/blog\/?p=31037"},"modified":"2015-05-29T08:14:51","modified_gmt":"2015-05-28T22:14:51","slug":"friday-lay-day-australia-heading-for-recession","status":"publish","type":"post","link":"https:\/\/billmitchell.org\/blog\/?p=31037","title":{"rendered":"Friday lay day – Australia heading for recession"},"content":{"rendered":"

\t\t\t\tIts the Friday lay day blog, which means very little as it turns out. Today, though it means a short insight into the latest data from the Australian Bureau of Statistics – Private New Capital Expenditure and Expected Expenditure<\/a> – data for the March-quarter yesterday, which showed that Australia is heading for recession-level private capital formation rates. The data also suggests that the Australian government’s fiscal strategy outlined earlier in May is based on deeply flawed forecasts of private spending and if the investment plans signalled in this data release are realised then the economy will slow substantially over the next 12 months. The fiscal stance in the most recent statement is towards contraction (austerity). In the light of the latest investment expectations revealed in the ABS data release, the Government should abandon their fiscal strategy immediately and announce a significant stimulus package. Unemployment is already rising and will rise further under the current trends. This is another case of neo-liberal austerity white-anting the capacity of the economy to deliver prosperity for all.
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\nIn the Federal Fiscal Statement (aka ‘The Budget’) which the Treasurer introduced to Parliament earlier in May, the Government was basing its austerity package on assumptions that Non-Mining Investment would grow by 2 per cent in 2014-15, 4 per cent in 2015-16, 7.5 per cent in 2016-17.<\/p>\n

The – Statement 2: Economic Outlook<\/a> asserted that:<\/p>\n

\nReal GDP is expected to grow by 2\u00be per cent in 2015\u201116. This is one quarter of a percentage point slower than expected 12 months ago in the 2014\u201115 Budget, as a sustained recovery in non\u2011mining business investment is taking longer than expected. However, stronger non\u2011mining business investment is expected to drive an increase in growth to 3\u00bc per cent in 2016\u201117.\n<\/p><\/blockquote>\n

So all the fiscal estimates (size of deficit, outstanding public debt etc) and the economic outcomes forecast (Real GDP growth, unemployment etc) are based, in part, on the recovery in non-mining business investment as indicated.<\/p>\n

Commentators (including myself) were skeptical as soon as the Government released the forecasts. There was no way that the economy was going to achieve the sort of performance that the Government was claiming and the only question was whether the fiscal austerity that was being signalled would drive the economy into recession.<\/p>\n

Now that we have more data, the reality is starting to look like recession if the Government does not rather radically alter its fiscal settings (from austerity to stimulus).<\/p>\n

Why do I say that?<\/p>\n

The first test of the Fiscal Statement estimates came yesterday with the ABS Private Investment data. The 2014-15 estimates are looking decidedly shaky. But the 2015-16 estimates are now looking to be about Planet Mars, given the expected spending plans signalled by private firms in that year.<\/p>\n

The ABS data shows that for the March-quarter 2015 (real and seasonally-adjusted):<\/p>\n