The Australian economy isn’t the basket case Treasurer Joe Hockey, the rest of the government, business groups and their media mates have been claiming since the gloomy mid-year outlook was released last December, it turns out. Economic growth picked up in the December quarter, ABS national accounts showed this morning, with growth of 0.8% seasonally adjusted — stronger than it was in the three months to September (0.6%).
In his first few months as Treasurer, Hockey first warned us of the dire threat to growth from offshore — back when he announced he was lavishing $9 billion on the Reserve Bank — and then after he took the lowest possible forecasts from Treasury for the Mid-Year Economic Forecast in order to portray himself as Hercules cleaning out the Augean stables left to him by Labor.
Today’s numbers, though, suggest Hockey was more Chicken Little. Growth through all of 2013 was a much stronger 2.8% compared to the annual rate of just 2.3% in the September quarter. The 2013 growth rate was much closer to the 3.1% growth seen in calendar-year 2012 and makes a mockery of the gloom not just from Hockey but even from the unions and Labor, anxious to portray the government as killing the economy through being unwilling to keep handing out money.
But when Hockey held his MYEFO media conference on December 17 last year to detail the contents of what appeared to be a “slit your wrists” assessment of the economy, the real thing was gathering pace — that’s what successive figures for retail sales, exports, the National Australia Bank’s business surveys and quite a few other measures show. Against that there was negative jobs data, looking like it would worsen in line with forecasts before it would improve. But the turmoil over the Holden announcement had little impact on consumers: they started using savings (the household savings ratio fell below 10% for the first time since mid-2010), spent more in shops, on property and overseas travel.
The only gloomy spot, which we knew about from last week’s capital expenditure data, was for private investment: gross capital formation — a measure of investment in the economy — was -0.5%. But thanks to the weakening dollar, the terms of trade rose 0.6% in the quarter as export volumes rose and import volumes fell (net exports added 0.6%). Final consumption expenditure came in at 0.5% — much stronger than many business economists had forecast — thanks to the surge in retail spending in the closing months of 2013 and the real estate boom.
Mining contributed to the growth (1.2% because of the rising level of exports), while manufacturing (1.5%), rental, hiring and real estate added a combined 4.2% (not unexpected given the surge in property prices and activity).
GDP per hour worked also lifted yet again, providing yet more evidence of the sustained period of labour productivity growth delivered under the Fair Work Act — up 0.6% in the quarter and 1.7% throughout the year, and slightly higher in the private sector. And unit labour costs fell 0.7% as well.