An alternative — but more accurate — economic history from the ABS
Glenn Dyer and Bernard Keane|
Jun 05, 2014 12:43PM |EMAIL|PRINT
The ABS’s revisions to previous GDP numbers show how dramatic the impact of the financial crisis was on the Australian economy, write Glenn Dyer and Bernard Keane.
It’s not widely known, but the people at the Australian Bureau of Statistics are a relentless mob, constantly checking on their data against previously reported figures and outcomes. They will change and revise figures for years in the name of accuracy.
This constant self-checking percolates down through successive national accounts, and every now and then it pays to check up on what the statisticians have been doing. In yesterday’s national accounts, there were a couple of great examples.
Normally the revisions are small beer in hindsight. The June 2013 quarterly GDP result, for instance, was originally reported at 0.6%, and has been upped to 0.9%.
But sometimes there are bigger revisions that change how we view recent economic history. The March 2011 quarter figures at the time contained a shock 1.2% contraction (seasonally adjusted) caused by the combination of the terrible floods in Queensland (especially Brisbane, as well as the coal fields in the centre of the state) and the cyclones, which restricted iron ore exports and helped send iron ore and coal prices soaring later in the year to record levels, boosting our terms of trade. But the March 2014 accounts show that that 1.2% contraction is now a fall of just 0.4%, a significant improvement. The original 1.2% had already been revised to a fall of 0.9% in an earlier set of accounts.
And there are more significant changes for that year. The June 2011 quarterly GDP rose 1.2% when originally reported, but that has now been revised to growth of 1.3%; the September quarter was revised up to 1.2% growth from 1.0%, and the December quarter growth has jumped to 0.9% from the originally reported 0.4%. Including the March change, revisions added 1.7% to calendar 2011’s growth, turning it into a much stronger year than it seemed at the time.
And then there’s a revision to growth in 2008 — specifically the last two quarters, when the financial crisis was gathering pace and then exploded in September of that year when Lehmann Brothers collapsed, dragging the world economy and financial system close to depression.
At the time, December quarter 2008 growth was estimated to have fallen 0.5%, after a small rise 0.1% in the September quarter. Well, the September quarter is now growth of 0.8%, but the December quarter is now showing a fall of 0.9%, or a turnaround of close to 7% of GDP (annualised) in the space of three months.
The following quarter, when growth of 0.4% showed Australia had avoided recession, has since been revised upward to 1.1%, showing the government’s initial stimulus measures having a greater effect than appreciated at the time. But fall of 0.9% underlines why the Rudd government, Treasury and the Reserve Bank were so concerned about the financial system collapsing and the economy sliding into deep recession or worse. It was the biggest quarterly fall in GDP since the recession of the early 1990s, when growth plunged 1.5% in the March quarter of 1991.
The March 1991 fall wasn’t the biggest we’ve had. The floods in Brisbane in January 1974 resulted in no growth in the March quarter of that year, and there was a nasty slide of 2.0% in that June quarter. The June 1979 quarter recorded a slump of 1.6% as the second resources boom collapsed; the collapse of the first resources boom in early 1975 resulted in a slump of 1.6% in the December 1975 quarter, aided by the turmoil of the Whitlam government and the Dismissal.
One can speculate that if the ABS had been right on the money in early 2009 and reported a contraction of 0.9% for the December quarter, the blow to confidence would have undermined the government’s desperate efforts to keep the economy afloat, and Australia would have entered official recession during the March quarter.
But either way, the figure discredits the persistent line from the Coalition and its media cheerleaders since we escaped from the GFC that somehow, things were never as bad as Labor made them out to be. With the benefit of hindsight, we now know they were significantly worse.