Wall St was down 94 overnight, its biggest fall in a month, while the local market is down 66.
The little recession that couldn’t
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It’s rare in politics or economics to get clarity on major issues or debates. One number can never provide that, but if any number could, it’s the one that emerged from the ABS today — 0.4%, in black, rather than red. For the moment, red is the appropriate colour for the faces of the many economists and forecasters on Monday who were tipping a fall, even if they hastily revised their forecasts into positive territory yesterday. For the Government and Treasury, this is as close to vindication of its stimulus approach as it will get. The retail sales numbers have supported it. The building numbers have supported it. Even the employment numbers last month supported it, even if no one including the Government believed them. But now the GDP numbers show unarguable growth. There’s not even a backward revision of previous quarters, except for a marginal decrease in December to -0.6%, which was offset by the same increase for the September quarter. Most remarkably, non-farm GDP actually grew faster than GDP, at 0.5%. We can’t even thank the cockies for keeping us out of recession. It’s only one number, and subject to future revision. But with more stimulus to roll out into the economy via the extension of the home owners’ grant, the infrastructure component of the second stimulus package, the big-ticket infrastructure projects announced in the budget and what’s left of the RBA’s rate cut drop, the chances of future negative growth appear slim, although another external shock could confound everyone’s hopes. And the more important questions is exactly how the impact on unemployment will play out, given those numbers relate to actual human lives. Nevertheless, this is what Treasury was aiming for when it told the Government how to craft its stimulus packages. This is why the Government went early and hard, why it tried to be “ahead of the curve”. Australia is now one of two developed economies with positive economic growth (S. Korea, who also went the stimulus route, is the other). And the proof is in the composition of the numbers. Imports are the biggest growth component (despite our suddenly-impressive trade performance). That means retail, which is one of the two sectors the Government bombed with cash in the December and March quarters. For once the Government’s positive spin will be well earned. It took advice on how to avoid a recession and acted accordingly, and it worked. It’s just one number, and it’s only a technical definition of recession anyway, but the psychological impact will be significant. There’s even a possibility that the Government went a little too hard, and may have to think about when to pull back on stimulus, but this is not an exact science, and better to have over-stimulated than under-stimulated. As for the Opposition, which wanted less or, depending on whom you ask, no stimulus, they’re up a particularly foul creek with not even a matchstick for a means of propulsion. The consequences of their opposition to the second stimulus package will continue to play out now that the Government can claim hard evidence that it has worked effectively. What can Malcolm Turnbull ask today? Whether 0.4% is evidence that the Government shouldn’t have spent so much propping up the economy? In any event, officers in Treasury and the RBA should enjoy a celebratory cup of tea this afternoon. They’ve earned it. |
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15 Comments
Well put Bernard, I now await your and the Govts detractors to attack as they surely will. The proof stares them in the face, but there will be negatives, they are Liberals.Up the creek without a matchstick, excellent.Well written and well done to Treasurer Swan, he took the abuse and won the day thus far, well done.
Here are some negatives: Negative negative growth. Or perhaps negative contraction.
This is a good time to have a closer look at some of those commentating journalists. One who has been very vigorously overegging his recessionary pudding is the ABC’s business editor, Peter Ryan. He has been reveling, in his inimitably nerdy way, in putting a very negative spin on whatever bit of economic data comes his way.
You get the sense from listening to him that bad news and negative spin are just a whole lot more exciting to him than a more measured evaluation of the evidence. It is about time his minders gave him a good talking to.
My latest data for NSW shows that 75% of people believe we are either not having a recession or just a mild one despite the governments best efforts to convince them to the contrary. I haven’t bothered to ask people about swine flu yet but I think I know what the answer to that will be as well.?
Yes, but we don’t determine if we are in a recession by having a poll on the subject. It’d be like voting to decide if we were going to have gravity.
Me Ski, I would argue that the same applies to the Anthro Global Warming hypothesis, and yet we argue still.
People like to argue. It sells paper and blogs.
Question Time has been fun so far today. Not surprisingly it focusses on the GDP numbers. The Oppn can’t possibly have a leg to stand on can they?
Gravity isn’t a hypothesis. Global warming is, and yes, people like to argue about it.
Haven’t had time to listen to QT, but I’m sure the opposition will come up with something to spin about. They usually do. How about: “one quarter’s positive growth isn’t conclusive in itself?” After all, they used it for the employment figures last time.
Richard Wison there have been some absurd comments made by Libs in Crikeys comments sections over the years but your effort today shows their is no limit to that degree of absurdity. The desperation is not limited to the parliamentary party.
Sorry, wrong Peter. In my post above I meant the economics commentator Peter Martin, not Peter Ryan.
Bernard, I’m not sure that being overstimulated is better than being understimulated in the long term - when it leaves a huge deficit that will have to replenished and unemployment still at unacceptable levels (and I am NOT a Liberal!). However, I totally agree that this is positive news and the psychological impact will, no doubt, be positive and significant with regards to the economic outlook.
Your tempting fate a bit with that headline, Bernard.
Well put. I can help but smile a bit inside. This is great news for our national ego.
….gloat, gloat, gloat….
In an act of denial that Richard Wilson would be proud of, The Australian has lauched its own internet readers’ poll,
“Do you think the Treasury’s figures are wrong, and we really are in a recession.”
the current voting is not that much different from Wilson’s similarly balanced poll.
If we all talk it down enough, maybe we really can make it into a recession
Bernard, love your stuff as always but…why do you, along with the rest of the sheep, keep using the term “negative growth?” It’s a spin doctor’s lie. Call it a contraction, a recession, whatever you like, but not ‘negative growth.’ There is no such thing. Are you going to refer to death as “negative life?” When the economy is booming will we suddenly have “positive contraction?”
Can’t wait for the moment when corporate losses become “negative profits.” Job lay-offs become “negative hiring,” etc. Or is some lying bastard already trying that?
It would have been wonderful to have been the proverbial fly on the wall when the news about being in the black hit the dishonourable member for Higgins! Olé, olé.