Fighting the good fight. It is no time to be smug but the Labor Government and its Treasury advisers have every reason to be pleased with the way it is handling the problems of a world in recession. The March quarter gross domestic product numbers out this morning are far better than the doomsayers had predicted. In seasonally adjusted terms, GDP increased by 0.4% in the March quarter. Through the year GDP growth was 0.4%, while non-farm GDP was flat.
Until they were surprised yesterday by better trade figures than the so-called experts had expected, (which led to some last minute revisions), the median expectation of financial sector economists surveyed by Bloomberg was a fall in GDP of 0.2 percent. So it is that the private forecasters have got things significantly wrong yet again and the people over at Treasury should be forgiven for their chuckles of delight about that. They have come under considerable attack since Budget day for being too optimistic about the likely consequences of their recession fighting policies.
On the expenditure side, this morning’s figures show the growth (in seasonally adjusted volume terms) over the past four quarters was driven by household final consumption expenditure (0.5 percentage points), Exports of goods and services (0.7 percentage points) and imports of goods and services (2.5 percentage points). Offsetting the growth during the past four quarters was a fall in inventories (detracting 1.9 percentage points).
On the production side, the strongest contributing industries to GDP growth (in trend volume terms) over the past four quarters was agriculture (0.5 percentage points). The biggest detractions have come from manufacturing (-0.8 percentage points) and property and business services (-0.5 percentage points).
Remember Ms Beacher of TD Securities? A special mention for the forecasting result of TD Securities senior strategist Annette Beacher who back in May was ” in shock” when the ABS March figures showing employment up and unemployment down was not what she and other economic analysts expected. Ms Beacher’s confident assertion back then was that the data did not alter her fundamental view of the economy. She still expected interest rates to bottom at two per cent and gross domestic product (GDP) to fall by 0.7 per cent in the March quarter. I will keep you posted on the interest rate front, but am inclined personally to find of way of backing an increase!