Thursday, December 17, 2009

"The less the people know about how sausages and statistics are made...

...the better they sleep at night"

- to further misquote a quote whose origins are already obscure

Tim Colebatch is blunt about Wednesday's September quarter growth figures which really tell us little more than that they don't make sense:

"I think the bureau is having trouble working out what is going on in the economy. The GDP figure it puts out is an average of three measures from different sets of data, covering expenditure, income and production. All year, all three of them have been having the loudest argument in the history of the national accounts.

The income and production data both show that Australia went into recession late last year, stayed there in the first half of this year, but accelerated into positive territory in September. But the expenditure measure tells a startlingly different story. It says we were booming in the first half of 2009, then slid back into recession in September.

To me, the story told by the first two makes sense. The third story is just barmy.

But the bureau has to average them out... and that's why it tells us growth slowed in the September quarter.

It's clear where the problem is. The expenditure figures confirm spending was in recession, but say all the damage fell on imports. They concede our export revenues also plunged, but estimate this is because average export prices fell 24 per cent in six months, and export volumes in fact rose in the middle of the deepest global recession for 70 years.

Common sense suggests that's wrong. More likely, the bureau has exaggerated the fall in export prices, and therefore overstated export volumes and growth. Our recession was probably deeper than its figures suggest, and our recovery from it is stronger."

Related Posts

. "If you throw enough money at a problem, some of it will stick". It has. We're back.

. "Something is very wrong with the GDP"

. Er, what is a recession anyway?


derrida derider said...

The original - "politics are like sausages - you're better off not knowing how either are made" - is Disraeli.

carbonsink said...

A wildly fluctuating currency, massive Chinese stimulus and speculative purchasing of commodities also complicates the picture. Certainly there was a big surge in Chinese commodity imports early this year. Ask a Rio Tinto exec whether iron ore volumes plunged in the middle of the worst recession in 70 years. I think she'll say no.

Regardless, if (when?) the Chinese investment bubble bursts the Aussie economy will soon be on the skids, and the dollar will be nudging 50c again.

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