While the Turnbull government will continue to enjoy bragging about the fact 400,000 jobs were created over 2017, there are some worrying signs in yesterday’s national accounts data, especially for a government that has just over a year until an election.
Overall, economic growth slowed in the December quarter, down from 0.7% in the September quarter to 0.4%. Over 2017, growth was 2.3%, compared to 2.9% in the year to September. Year-on-year, per capita GDP growth was just 0.8%. This is a continuation of the tepid growth we’ve had since 2013, and seemingly at odds with the 400,000 jobs — but we’ll come to that in a moment.
In the bush, however, things are worse. Rural goods exports fell 9.7% in the December quarter, and according to the National Australia Bank’s analysis, farm GDP fell 3.3% in the December quarter after a 6.5% slide in the three months to December, to be down 10% for 2017. In the wider economy, that would be called a technical recession.
It illustrates why, for all the relentless focus on Barnaby Joyce’s private life by the media, the real problem with Joyce was always that he was an absolute dud as a minister and leader. A 10% fall in farm GDP is Barnaby Joyce’s legacy to the people of rural Australia from his time as agriculture minister, and a testament to how badly out-of-touch the party of the bush is supposed to be.
Then there’s labour productivity. GDP per hour worked went backwards in the quarter, by 0.8%, and fell by 1% in net terms across the year. Gross value-added per hour worked in the market sector fell for a third quarter in a row. This is the flip side of having a low-growth economy that’s producing lots of jobs: hours worked must outstrip growth until growth picks up or hours worked falls back again. Moreover, much of the growth in jobs has come in health and education, the two sectors hardest to measure in terms of labour productivity.
Ditto with wages growth, or lack thereof. As AMP’s Shane Oliver pointed out yesterday, the overall growth in total compensation of employees of 4.8% in 2017 was because of jobs growth, not wages growth. There were a lot more jobs, but average compensation per employee grew just 1.6% over the year. That was lower than the recent 2.1% wage price index (WPI) result because low-paid jobs are growing more rapidly than high-paid jobs.
At least that meant a rise in household consumption — 1.0% for the quarter and 2.9% for the year. But we already know that’s not going to last into this current March quarter, because retail sales figures for January showed a miserable 0.1% growth.
The positive for the government is growing investment outside housing construction and mining — even if it rather contradicts the “tax cuts are needed for investment” fantasy it peddles. But its continuing refusal to face up to wages stagnation — witness the current demonisation of the CFMEU-MUA merger as ushering in the Four Horsemen of the IR Apocalypse — and a recession in the bush does not augur well for a government that has to face the voters sooner than it would like.