No call to pop corks
Townsville THE discussion around the latest GDP figures – the closest thing we have to an overall measure of the nation’s economic health – has to be just about the weirdest I’ve seen.
We’ve been preparing to proudly pat ourselves on the back for the figures delivering a world record run of staying out of recession – while at the same time crossing our fingers that the same figures didn’t show us teetering on the edge of recession if not actually sliding into one.
So yes, as it turned out, OK, we could pat ourselves on the back with one hand while uncrossing the fingers on the other hand.
But there was no cause to then break out the champagne ( imported of course and paid for by about half a tonne of iron ore). The figures were at best pretty ordinary. If this was an economic gold medal, it was more Steven Bradbury than Cathy Freeman.
Yes again, we didn’t see the negative “growth” figure – that it to say, non- growth – that some feared. But at the just barely positive + 0.3 per cent for the quarter, making just 1.7 per cent for the year and so only just keeping pace with population growth, it was limp at best, and pathetic more honestly.
More pointedly, over the nine months of the 2016- 17 year so far growth has added up to just 1 per cent.
So unless we get some big, big, upward, revisions of that growth – in effect, finding some extra growth in the economy over the last nine months under some statistical stone so to speak – we are not going to reach the 1.75 per cent full- year 2016- 17 growth that Treasury forecast in the Budget just a month ago.
Now this does not mean either that the Budget’s deficit will necessarily get blown out, or that the much healthier growth forecast by Treasury ( and also the Reserve Bank) for the coming financial year and on to 2020 will be wrong. Bluntly, we will find out as we go along. Treasury/ RBA are punting on a broad- based, sustained, if unspectacular, pick- up across the global economy – the US most critically, but also Europe and Japan with China ‘ levelling out’ rather than booming.
Domestically, Treasury/ RBA are punting on the resources investment slowdown China- like levelling out, consumer spending picking up a little and no collapse in our commodity prices.
But nobody is forecasting good, far less great times, ahead anytime soon: either at the overall national level or at the individual level where it’s less about “jobs and growth” and more about “jobs and ( sluggish) wages”.
A few years back we had “profitless prosperity” – we were recording relatively healthy economic growth because we were shipping more and more into the global market, but our national income was sluggish or falling because the prices we got had dropped from their peaks.
We were pumping ( out) more iron ( and coal), but we were getting ( slightly) poorer.
In the last year or so we’ve had the reverse. Economic growth has been sluggish – that 1.7 per cent over the last 12 months, but national income has been rocketing along, increasing by 5.6 per cent over the same period, thanks to the rebound in commodity prices.
But either way, that hasn’t percolated directly into wages and salaries. Although consumers have gained from very low inflation and indeed negative inflation in the supermarket.
And for the 70 per cent or so of us owning or buying a home, we’ve mostly – apart from recent buyers – picked up a nice capital gain and increased spending power if we want to use it.
A big indicator of what might lie ahead is the way we are saving less – a consequence of that low wage growth and the payment pressure ( even with very low interest rates) of the very big mortgages now needed to buy a home.
A few years back, across the economy we were saving around 10 per cent of our incomes on average. That’s been on a sustained fall since 2012; we are now saving just 4.7 per cent of incomes, the lowest it’s been since around 2005.
This is arguably the most ominous pointer to our ability to sustain spending through 2018 and even more 2019 unless we see some significant pickup in both wages and jobs.