Australia goes negative while NZ stays positive

OH DEAR, cancel that boast. It’s now official – the Australian economy in the September quarter will actually be smaller than it was in the last quarter before Covid – December 2019.

This will make the gap between our performance and that of New Zealand – you know, that pair of biggish islands east of Sydney that people of all classes and all political affiliations and ideologies, tend to rather dismissively look down on – which was already embarrassingly large, widen even further.

Now Treasurer Josh Frydenberg didn’t actually come that clean; what he did say in a speech was that GDP was now estimated by Treasury to have shrunk by at least 3 per cent in the September quarter.

It’s me telling you how it impacts on the “Treasurer/ Treasury boast”, expressed most recently in the Treasury “assessment” of JobKeeper released Monday.

And I quote: “In the June quarter 2021, Australia was still ahead of major advanced economies in recovering pre-pandemic levels of GDP (December quarter 2019), with the United States the only country out of the G7 to return to pre-pandemic levels”. As I detailed yesterday, our June quarter GDP was up 1.7 per cent on the last pre-Covid, December 2019, quarter. This was better than the only other positive outcome – a little under 1 per cent over those 18 months for the US – among the international comparisons that Treasury “chose” to detail.

There was one country that Treasury “chose” not to detail. It was also a country not mentioned once in the 69-page report despite the two of us having very similar JobKeeper programs.

Indeed, despite the whole 69 pages supposedly being an “assessment” of precisely that; JobKeeper. And despite that country, NZ, being our nearest economically comparable neighbour.

As I detailed yesterday, the comparison might have been a tad embarrassing. NZ’s June quarter GDP was up a stunning 4.4 per cent over the December 2019 quarter.

That’s outperforming, obliterating, our 1.7 per cent that Treasurer and Treasury like to boast about.

Correction, liked to boast about. After the September quarter number surfaces, we will have joined all those countries – except NZ – in being back below the December 2019 quarter.

If GDP falls 3 per cent in the quarter, we will be 1.4 per cent below.

If GDP falls 4 per cent in the quarter, we will be 2.4 per cent below.

Perhaps it just slipped the Treasurer’s mind, to take that further step; perhaps Treasury hasn’t been able to work it out yet.

That wouldn’t surprise: Treasury does have difficulty working most things out.

The Treasurer now tells us that the plunge in the September quarter is going to be greater than Treasury had previously ‘predicted’.

That fits perfectly: the June quarter had itself turned out to be much stronger than Treasury predicted. In the May budget Treasury forecast zero or slightly negative GDP growth (it didn’t actually tell us; again, I worked it out). In fact GDP grew by 0.7 per cent, or nearly 3 per cent annualised.

Bottom line, in stark contrast to us, when the numbers come in for the September quarter, NZ will still be above its pre-Covid GDP peak. Yes, Frydenberg can legitimately blame the NSW and Victorian lockdowns for the negative September quarter GDP.

And yes, he can point to a likely surge in GDP in the December quarter as NSW and, belatedly, Victoria come out of lockdown. But NZ has also been in an economycrunching lockdown – albeit, much, much shorter than NSW and Victoria.

They just seem to do things better there: dramatically less JobKeeper waste; a better economic outcome; even a better virus outcome (so far). Maybe we could do things better here, by sub-contracting our fiscal work to the NZ Treasury.