Australia’s stunning GDP leap in new Australian Bureau of Statistics trade figures is both slightly misleading and proof that retail woes don’t reflect the whole non-mining economy, according to SA-based economic authority, Professor Richard Blandy.
“There are three elements to untangling what appear to be surprises and inconsistencies in the GDP data released by the ABS on Wednesday and the employment data released by the ABS today,” Professor Blandy says.
“First, the seasonally-adjusted GDP numbers give an impression of much stronger growth than the more smoothed trend numbers. The trend numbers give a plausible GDP growth figure of 3.6% for the year (compared with the very high 4.3% coming from the seasonally-adjusted numbers).
“The reason for this difference is explained by there being a dip of 0.5% in the base quarter March 2011 seasonally-adjusted GDP data, but a rise of 0.4% in the corresponding March trend GDP data. About 1% of the rise in seasonally-adjusted GDP is quite possibly due to seasonal error, therefore.
“Second, our impressions of slackness in the economy may have been excessively influenced by the slow growth in retailing, where clothing and footwear in particular have fared badly. Other sectors have done reasonably well over the past year, however, including agriculture, mining (of course), construction, wholesale trade, finance and insurance, professional, scientific and technical services, public administration and safety, and other services.
“In the consumpion area, food, alcohol, cars, transport services (like international travel), and hotels and cafes have done well.
“Third, the employment and unemployment data tell a story of a much less robust economy than the GDP data do. The trend data show only a 0.5% annual increase in the number of jobs nationally and a fall in South Australia of 0.5%. Unemployment rates have also fallen, not because jobs growth is strong but because people have become discouraged by the lack of jobs and have given up looking for work.
“Australia's ‘labour force participation’ rate has fallen by 0.3 percentage points over the past year and SA's by 0.8 percentage points. These are not signs of strong economies.
“So the upshot is that the Australian economy is not as strong as the recent GDP data suggest, but nor is it as weak as the retail data suggest. We are muddling along at present, thanks to the mining boom and the lift in incomes driven by the high dollar.”
Prof Blandy is Adjunct Professor of Economics at the School of Management of the University of South Australia.
Updated 7 June 2012