Thursday, September 06, 2012

GDP. Good til the end of June, but...

Treasurer Wayne Swan has lashed out at “bizarro” critics as he has called on the nation to celebrate a world-beating 21 years of uninterrupted economic growth - more he says than the leading industrial nations of France, West Germany, Italy, Japan, United Kingdom, United States, Canada combined.

“There will be ups and downs in the quarters ahead but sometimes when I listen to the debate it seems to be conducted in some bizarro world where every challenge is magnified and every strength is ignored,” he told reporters on the release of national accounts showing solid economic growth of 0.6 per cent in the June quarter and 3.7 per cent over the year to June.

“We have had 21 years of continuous growth and our growth in the past four years has outperformed every other major advanced economy. That’s like winning 21 continuous premierships in the row and winning the last four very, very comfortably.”

Asked to name the “bizarro” critics, he referred to “disgruntled vested interests,” adding later the views of mining magnate Gina Rinehart did not deserve the publicity they received.

The national accounts show an economy powered by mining over the past year, with engineering construction up a striking 60 per cent, the fastest annual growth in more than 30 years. But non-mining investment fell for the the third consecutive quarter, slipping to its lowest point as a proportion of gross domestic product in four decades. Exports climbed 6.6 per cent..

Household spending grew by a surprisingly weak 0.6 per cent in the June quarter as families saved a larger than expected proportion of the $2.85 billion carbon tax and schoolkids bonus payments delivered in May and June.

On both fronts the figures point to darker times ahead...

Mining investment plans are being cut back in response to dramatic slides in commodity prices, although the Treasurer said a record $260 billion in planned investment was already locked in.

Household spending will be without the support of government bonus payments in coming quarters and the Treasurer hinted at further budget tightening in the November budget review should commodity prices not improve.

“Commodity spot prices have fallen by more than we anticipated in May, and obviously there would be a further hit to the budget bottom line if these lower prices were sustained,” he said. “That will make our budget task harder, but we are absolutely committed to delivering a surplus in 2012-13.”

“The Government has a proven track record of delivering savings and we remain able and willing to do it again.”

Shadow treasurer Joe Hockey said July was turning out to have been “the worst possible time” to introduce a carbon tax and a mining tax. “All the indicators are trending in the wrong direction and exactly at this time the government is making life harder,” he said.

The accounts show the mining states of Northern Territory, Western Australia and Queensland jumping out even further ahead of the pack with annual spending growth of 28 per cent, 13 per cent and 7 per cent.

Spending in the Australian Capital Territory grew 6 per cent assisted by a boost in government expenditure. NSW was strongest of the other states, boosting spending an improved 3 per cent. State Treasurer Mike Baird crowed that (in seasonally adjusted terms) NSW had double the spending growth of Victoria, where spending grew in trend terms 2.3 per cent.

The measure of inflation in the national accounts is an extraordinarily low 1.6 per cent, giving the Reserve Bank ample room to cut interest rates if needed.

Published in today's Sydney Morning Herald and Age

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