Tuesday, June 10, 2014

Dumbing down the ABS. Like driving at night dimming the lights.

We’re mining our socks off. And that’s good, right? In the first ten months of the previous financial year we moved $46.2 billion of iron ore. In the first ten months of this one we moved $64.3 billion.

The surge is putting GDP back on track. This time last year our gross domestic product was growing at an annual pace of 2.5 per cent. Now it’s 3.5 per cent, about the long-run average. And that’s good too, right?

The best and least likely place to discover that it isn’t necessarily alright is a new book entitled GDP: A Brief but Affectionate History by British economist Diane Coyle.

In it, she pays special attention to Australia.

Measuring GDP is not like measuring the height of a mountain or length of a river, she says. GDP is a concept; the total value of all the goods and services produced in a nation over a particular period of time. But what’s a good or a service? One of founders of the concept in the 1940s, US economist Simon Kuznets originally didn’t want to include advertising. It was persuasion rather than a product, he said. Unpaid housework isn’t included because isn’t valued (on the market) but paid housework is. Teaching in government schools is included (at a guestimate of its value) even though it isn’t bought and sold, and so on. It’s messy,  and even if it wasn’t it would take no account of other measures at least as important.

No less an authority than the Australian Bureau of Statistics says so. “While movements in the volume measure of GDP are an important indicator of economic growth, there is no single measure that can describe all aspects of the wellbeing of Australians,” it says.

So it creates a separate scorecard, Measures of Australia's Progress. It looks beyond GDP to assess the other things that are important, among them “the quality of the environment, the wellbeing of the population in terms of health, education, work, housing and economic resources, and the way people live together in society”.

The initiative has entranced Coyle.

“The data are collected and published once a year on a traffic light system - red is getting worse, green is getting better,” she told a US radio interviewer. “And last year it was very clear that GDP growth is going great in Australia, and that was green. And resource depletion had worsened, so that was red.”

“And actually, isn't that trade-off really clear?,” she enthused. “Australians know that they are digging up the mineral resources of the country to have GDP growth now. They still would carry on doing it, but at least they know they did it.”

Until now. On Thursday the Bureau of Statistics axed Measures of Australia's Progress and shrunk or axed another twelve projects, most involving the collection of social or industry statistics...

It needs to save $50 million. It is losing 116 staff. The cuts are not, as you might expect, primarily the result of the Coalition's attempt to get the budget back to surplus. They are the result of repeated cuts by Labor in the guise of efficiency dividends. Before he retired in January the head of the Bureau pleaded with the government for an extra $300 million to “keep the lights on”. Its 30-year old technology systems were barely coping. “The overall situation has been progressively impacting on the time and effort required to produce key official statistics on time and to the quality expected by our users and now seriously compromises our longer-term sustainability,” he wrote.

He didn’t get the extra funding and he hasn’t yet been replaced. Economies have pushed the response rate to the flagship employment survey to its lowest level ever. The employment survey is best monthly indication of how the Australian economy is traveling. But in at least one sense it is the least reliable it has ever been. It’s as if the government is navigating an economic highway while dimming the lights.

And starving itself of fuel. The budget papers say the Tax Office will lose 2329 staff in the coming financial year on top of the 626 it is losing this year. The cuts come as it’s been given extra work introducing the temporary budget repair levy and winding up the carbon and mining taxes. It’ll probably check fewer returns and think twice about expensive court cases. If not now, then later. “The budget papers signal further reductions in the out years,” the Commissioner has warned staff.

The Australian Securities and Investments Commission is meant to protect us against outright fraud. Its budget will be cut 12 per cent in 2014-15. It will lose 209 of its 1782 staff, also a cut of 12 per cent.  Its surveillance activity “will substantially reduce across the sectors we regulate and in some cases will stop,” its Chairman told a Senate hearing last week. “For obvious reasons” he didn’t want to identify the industries that no longer be checked.

We need protection from dodgy financial planners. Our government needs income. And we all need to know where we are going. An obsession with cuts to return the budget to surplus is starving us of all three. It would be nice to think our leaders had thought it through.

In The Age and Sydney Morning Herald

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