Joining the rest of the world. Wayne Swan is a prudent fellow. He did not join his Finance Minister Lindsay Tanner this week in expressing a belief that Australia just might escape from having an economy in decline during the December quarter. Instead the Treasurer chose to remind us that growth in the United States had contracted by 1.6% in the December quarter, by 1.5% in the UK, by 3.3% in Japan, by 6.1% in Taiwan and by 0.8% in Canada. “So that will impact on Australia,” he warned. “I don’t think there is any doubt about that, and we would be kidding ourselves if we pretended that it didn’t impact on Australia.”
And impact it certainly did with Australia’s gross domestic product (GDP) falling 0.5% in the three months to December — a much worse result than expected by the pundits (including Lindsay Tanner who this morning was still “optimistic” that it will be above the line, rather than below). The median estimate of 23 economists surveyed by Bloomberg News was for 0.2% growth.
The key points in this morning’s release by the Australian Bureau of Statistics were:
- Key aggregates: In trend terms, GDP decreased 0.1% and Non-farm GDP decreased by 0.3%. GDP per hour worked in the market sector fell 0.2% and the Household saving ratio was 6.6.
- In seasonally adjusted terms, GDP decreased by 0.5% in the December quarter. Non-farm GDP decreased by 0.8%. The Terms of trade fell 2.8% and Real gross domestic income fell 1.2%.
- Expenditure on GDP: In seasonally adjusted terms, the largest negative contribution was from Inventories (-1.6 percentage points), offset by positive contributions from Imports (1.7 percentage points) and Private business investment (0.2 percentage points).
- Industry gross added value: In seasonally adjusted terms, the main contributors to the fall in GDP were Manufacturing (-0.5 percentage points), Property and business services (-0.3 percentage points), and Wholesale trade (-0.2 percentage points). This fall was partly offset by a positive contribution from Agriculture, forestry and fishing (0.2 percentage points).
Get home from Afghanistan. If I understood the rhetoric of George W Bush correctly, the invasion of Afghanistan by the United States, its NATO allies and a few hangers on like Australia, was to tackle the forces of terrorism that humiliated the United States by flying planes in to the World Trade Centre. The terrorists were trained in Afghanistan by Al Qaeda and the way to ensure something similar did not happen again was to install a government that would not tolerate such activity.
Seven years later, a corrupt and incompetent government installed by the US and its allies has lost control of vast areas of the country to the Taliban Islamic militants while Al Qaeda still roams free. Unfortunately electoral politics in the home countries of the invaders has not allowed the retreat from Afghanistan that common sense might dictate.
Just as Barack Obama feared being labelled weak if he added Afghanistan to his pledged withdrawal from Iraq, Australia’s Prime Minister Kevin Rudd campaigned to attract peace lovers with his Iraq withdrawal promise and supporters of the American alliance with his tough words about fighting terrorism in Afghanistan. So the fighting goes on with the United States dispatching an extra 17,000 troops without any clear strategic purpose in mind. As US Defense Secretary Robert Gates admitted in response to a question on NBC’s Meet the Press on Sunday:
We’re talking to the Europeans, to our allies; we’re bringing in an awful lot of people to get different points of view as we go through this review of what our strategy ought to be. And I often get asked, ‘Well, how long will those 17,000 [additional troops] be there? Will more go in?’ All that depends on the outcome of this strategy review that I hope will be done in a few weeks.
Quite an amazing confession really.
End the bulk buying. The world’s liquor industry — retailers as well as producers — will be looking with very mixed feelings at the experiment about to begin in Scotland which will try and put an end to cut-price sales. In an attempt to curb consumption the Scottish Government plans to put an end to offers such as buy two, get three and 20% off for purchses of six or more bottles of wine. A minimum price for a standard bottle of spirits is also being introduced.
The Scotsman reports that Ministers believe that they will be able to introduce minimum pricing through existing licensing laws by ordering councils to issue a mandatory condition that minimum prices are introduced. Using devolved licensing powers means the Scottish Government will not need MSPs to approve minimum prices through further legislation. It seems likely that it will only need to be rubber-stamped by one of the committees.