Today Reserve Bank Governor Glenn Stevens appears before the House of Representatives standing committee on economics, but there’s one question you won’t here from the government. “Mr Stevens, what has been the effect of the cuts we made to the budget of the Australian Bureau of Statistics’ budget?”
They won’t because it would embarrass them to hear what the Governor would say. So will the opposition members think to ask? And if nobody asks Stevens about it today, the effect of the $20 million haircut will be on full display with the release this week of two vital sets of monthly statistics: the labour force and retail sales numbers.
They are among the most timely of the stats to be released by the ABS because of their ability to quickly reveal trends in the domestic economy. They are expensive because the ABS has to throw as wide as net as possible to get as many responses from people and groups it is surveying, and they then have to be analysed as rapidly as possible and reported.
Along with building approvals, retail sales tell us a lot about what is going on in the domestic economy and what consumers (who are responsible for more than 60% of the activity in the economy) are doing. The labour force figures give us the first indication each month of what went on in the preceding month in the labour market: it is actually the first major figure to be released each month by the ABS.
They are vital for economists, the Reserve Bank, Federal Treasury and other departments, state and Federal, and for social welfare policy. To pay the Government its miserable $20 million saving, the ABS has been forced to adjust the way it conducts both surveys, especially the breadth and depth.
Chief economist for AMP Capital Investors Dr Shane Oliver says that:
From this week there will be a worry about the reliability of the jobs figures from the Australian Bureau of Statistics, and more importantly, the retail sales figures.
Retail sales data are probably the key economic series to watch in Australia right now, but the reliability of the monthly retail trade data produced by the Australian Bureau of Statistics is about to deteriorate dramatically.
Thanks to Government funding cutbacks announced in the last Budget, starting with the July release in the week ahead the ABS has had to reduce the size of the survey of retailers used to produce the numbers by two thirds which will likely lead to big increases in month to month volatility and make their interpretation far more difficult.
As a result, it will not be publishing original and seasonally adjusted data in the retail trade publication. Given the importance of getting a decent handle on what consumer spending is doing right now the timing of the Government’s funding cutbacks for the ABS could not have been worse.
He’s got it on one. And in a note to clients today, Goldman Sachs JBWere warned:
We expect that this month’s retail release could cause some confusion for the market. Due to a new budget constrained methodology, the reliability of the report has been greatly compromised and the usually prominent headline seasonally adjusted number is being buried in the depths of the report.