The ABS has released what is likely the last quarterly GDP report before a Commonwealth election expected in May. Coalition leaders were hoping a strong report would underline their standard talking points about being the best “economic managers.” But they were badly disappointed.
The headline number was bad: Just a 0.18% increase in GDP for the December quarter, barely above zero. But the details, if anything, were worse.
Some of the major takeaways from the ABS report include:
- Real GDP per capita in Australia has now declined for two consecutive quarters: creating a so-called “per capita recession.” This is because the economy is growing more slowly than the population.
- Consumer spending was the weakest in five years, suppressed by weak wage growth, falling property prices, andhuge consumer debts.
- Net exports and housing investment both declined.
- Business capital spending was very weak, despite growing profits. This may be the most damning refutation of the logic of “trickle down” economics: despite strong profits and a favourable policy regime, business is failing to invest more in real projects.
- Workers’ share of the total GDP pie fell again in the December quarter – and for the 2018 calendar year, shrank to the lowest of any year since the ABS began reporting this data in 1959.
- A broad measure of wages (total labour compensation per worker) grew just 0.3% in the December quarter, and just 1.9% over the year as a whole. This indicates wage growth is slowing down, not picking up.
Australia’s economic growth in recent years has been fueled by three unsustainable factors: a property boom, rapid growth in consumer debt, and a spurt in resource exports (especially LNG) that has now leveled off. Those drivers are all shifting into reverse. More sustainable drivers of progress (including public and private investment, rising wages, and domestic demand) have been absent. These weak economic numbers should foster an important debate in the lead-up to the election: let’s get beyond slogans about who are the best “managers,” and start to think big about building an economy that is sustainable and socially beneficial.