Thursday, September 03, 2015

Economic growth close to zero as living standards slip

A sharp fall in national income has all but obliterated economic growth, pushing down income per head by the most since the global financial crisis and delivering headline growth of just 0.2 per cent.

The best measure of living standards, real net national disposable income per head, slid 1.2 per cent in the three months to June, the biggest slide since the global financial crisis and the 1990s and early 1980s recessions and the mid 1970s oil crisis.

It's the fifth consecutive slide in real net disposable income per head. It is now 5 per cent below its peak at the height of the mining boom in 2011.

Treasurer Joe Hockey attempted to put a positive spin on the result by comparing Australia with countries that are performing worse.

"Canada overnight reported they have now officially fallen into recession," he told a Sydney press conference. "New Zealand had a growth rate of just 0.1 per cent in the March quarter and it's facing significant headwinds. Other commodity-based economies like Brazil are also facing huge challenges."

Australia's economic growth rate is lower than Greece's, lower than Britain's and the United States' and lower than the European Union's...

Had it not been for a surprise 41 per cent jump in government spending on defence equipment in the quarter, economic growth would have been zero. The Bureau of Statistics said the jump in defence spending was responsible for all of the 0.2 percentage points of economic growth.

Asked whether government spending was deliberately brought forward in order to forestall a recession, Mr Hockey replied: "I can promise you it wasn't planned to be that way."

Ongoing government spending also jumped by more than usual, climbing 3.4 per cent in the quarter, more than three times as much as in previous quarters. The Bureau of Statistics said this too was responsible for 0.2 percentage points of economic growth.

Labor treasury spokesman Chris Bowen said none of the weakness in the June quarter figures was due to the sharemarket turmoil in China.

"This all predates that," he said. "If anybody from the government has suggested that to you, they're misleading because to say that events in recent weeks in China could have affected these figures misunderstands the period of time which these figures come from."

The Australian sharemarket slipped 1.5 per cent on the GDP news before rebounding in line with markets overseas. The Australian dollar dipped below US70¢ for the first time in six years, before recovering to close about one third of a cent above US70¢.

Australia's annual growth rate was just 2 per cent, the lowest since the dying days of the Gillard government in 2013 and well below the long-term average of 3.25 per cent. Nominal GDP, a measure in current prices which provides a good estimate of tax revenue, climbed by just 1.8 per cent in the financial year, an increase the Bureau of Statistics said was the lowest since 1961-62.

At his press conference Mr Hockey appeared to take issue with the Bureau of Statistics, saying: "It is wrong to say it's the weakest growth since 1961, it' is just factually wrong.

"The fact is that the economic growth we had in the last quarter was in line with expectations. Of course it bounces around from quarter to quarter but it was in line with our overarching expectation to have 2.5 per cent growth in the last financial year."

GDP per head went backwards in the June quarter, sliding 0.2 per cent, indicating that all of the economic growth was the result of population growth.

Business investment slipped 0.7 per cent in the quarter and 6.8 per cent over the year. Home building activity fell 1.1 per cent, after a surge of 10 per cent in the previous six months. Household spending climbed 0.5 per cent.

Australia's export income slid 3.3 per cent.

In The Age and Sydney Morning Herald