Thursday, March 08, 2007


Look where growth is picking up...

Now look where growth is slowing down...

These graphs from the ANZ are taken from the December quarter national accounts, released on Wednesday.

Below is what I wrote for Thursday's CT...

A surge in consumer spending at the end of last year has pushed up Australia’s rate of economic growth and sparked talk of yet another interest rate hike.

Gross Domestic Product jumped by 1.0 per cent in the last three months of last year – twice as much as expected – despite repeated interest rate rises.

GDP climbed by 2.8 per cent throughout the year, with consumer spending soaring 3.8 per cent.

Imports jumped by 10 per cent, outstripping slower export growth of 4 per cent.

The Reserve Bank pushed up interest rates three times last year last year in May, August and November in an attempt to restrain spending and inflation.

Yesterday’s accounts released by the Bureau of Statistics suggest that consumers were resilient in the face of those hikes, spurred on by increases in both employment and household wealth.

The chief strategist at TD Securities Stephen Koukoulas said the accounts were enough to “jolt the complacency about rates being steady”.

The most likely date for another interest rate hike is August 8, the day after the Reserve Bank board meeting which will consider the much anticipated June quarter inflation figures.

The Bank’s governor Glenn Stephens told a parliamentary committee last month that he had no qualms about lifting rates in an election year. “I do not accept and I do not think we ever could accept the idea that in an election year, which is one year out of three, we can not change interest rates, that would be crazy. If in August if it needs to be done it will be done,” he said.

The accounts show an acceleration of growth in Australia’s southeastern states with trend growth climbing in NSW, Victoria, South Australia and Tasmania. Demand growth fell in the mining-rich states of Western Australia, Queensland and the Northern Territory suggesting that impetus from the mining boom is slowing. Trend growth remained steady in the ACT.

The state figures came as a relief to the NSW Premier Morris Iemma who was campaigning in Queanbeyan. He had been bracing himself for claims of a technical recession if NSW demand had fallen again in the December quarter after sliding in the September quarter.

Instead it rebounded 1.4 per cent. The Premier said his rival the Liberal Leader Peter Debnam had been “rubbing his hands with glee hoping for the worst possible news on the economic front.” Mr Iemma said he was not satisfied with the 1.4 per cent rebound in NSW, adding that his state had “a long way to go” to get close to Western Australia.

In fact, on the figures released yesterday NSW is closing in on Western Australia. Its quarterly trend rate of growth in state final demand is 0.6 per cent, Western Australia’s is 0.9 per cent.

The big divide in economic growth is now between the cities and the bush. GDP fell 11 per cent in the December quarter. It has fallen 23 per cent in the last year