Thursday, September 04, 2008

Let’s look at the bright side.

Australia has just recorded its 17th consecutive year of economic growth, a result without president.

There’s every sign we’ll reach an 18th.

Sure, the rate of economic growth has slowed, but the important thing is that it is continuing.

State governments such as Victoria’s have embarked on very big capital works programs to help, and the rest of the world has helped by boosting our buying power by an extraordinary 13% in just 3 months.

And the growth is becoming more manageable. The National Accounts suggest that inflation may have peaked. Wage costs are falling relative to profits, suggesting that the jobs fallout of any slowdown is unlikely to be too bad.

Any problems we’ve got are the sort of problems our fellow developed economies – among them New Zealand, the US, the UK and Japan – would sell their souls to have...

The challenge for our Reserve Bank and for the government is to work out how to keep economic growth going all by themselves.

Neither other countries nor our own history can provide any guide.

We literally moved beyond history some time ago. History would have dictated a recession at the start of this decade, just as there was a recession at the start of the 1990s and the 1980s.

Having escaped our decade-long cycles of boom and bust our economic managers need to manage for the future in way they never had to.

It’ll mean relying on evidence rather than trends and being prepared to adjust rates down, or up, or not at all as needed.

No-one can predict what the Reserve Bank will do next, because at the moment it itself doesn’t know.

Immediately it’ll scour next week’s employment and retail trade figures for clues.

The retail figures will be particularly important.

That’s why it’s a pity that the Australian Bureau of Statistics has decided to butcher them. In order to save an estimated $700,000 it’s going to cut the number of firms it surveys each month by 30 per cent.

It revealed yesterday that it expects the margin of error in next Tuesday's figures to increase by 40%.