I left this post until the latest gross domestic product figures came out earlier today.
I don’t want to add to the economic growth noise. Far from it.
I want to outline the broad indicators I like to look at when trying to work out what is really going on with our economy.
I have included five charts.
The March quarter growth in GDP was a surprising 1.8% as many economists expected a 1.5% quarterly lift.
And whilst the Australia’s economy grew by just 1.1% over the past twelve months to March 2021, it is the fastest recovery from a recession in 45 years.
Tomorrow’s headlines will shout “Rebound” or similar, but that is really only half the story.
Chart 1 outlines Australia’s quarterly economic growth against a trend line of what the size of the economy would have been without Covid and our response to that virus.
This chart shows the real effect of Covid: it has left a massive hole in our economy and one that will be unlikely filled. Of course, in addition we incurred a huge debt too.
The size of this economic hole is currently $104,000 million or the equivalent of six months’ worth of economic growth. A simpler way to put it is that we lost $4,100 per person, so far, since the beginning of 2020.
And chart 1 shows that we haven’t plugged this hole yet.
Chart 2 shows me that new private expenditure remains lacklustre, and it has been this way for some time. Australia’s economy, of late, has been largely driven by government spending. Rising capex is needed to genuinely drive a capital economy.
Chart 3 tells me that public service is doing okay and that the private sector borne the brunt of the Covid ‘recession’. A whilst things are improving on the private front, there is still a ways to go before many of us are back to working at full capacity.
Of course, the hours not worked over the last twelve months has the same negative impact on the community has suggested in chart 1. No doubt government measures such as Job Keeper helped but they have gone now.
Chart 4 shows you what most of us know to be true; that there is stuff all wage growth. And for mine it will take a lot more than falling unemployment to turn this trend around.
And finally chart 5 shows that we weren’t too confident last year, and many saved every cent they could. We seem to have reopened our purse strings a bit and hence we are seeing a lift in retail consumption. But many still remain hesitant and are still saving for a rainy day. A smart move.
I must admit I am quite over all this economic growth stuff. I typically don’t include GDP or other similar stuff in my reports or presentations. I like to know what is happening with jobs, hours worked and rates of pay, but not the often-cited ‘cure all’ such as GDP or similar figures.
As I get older, I think that having a single overriding ‘economic’ health measure such as GDP is flawed. New Zealand is leading the change – like many things it seems these days – and they have taken a more comprehensive stance measuring a range of indicators which they have called – Living Standards Framework – to better judge their ‘economic’ wellbeing.
Another smart cookie is Kate Raworth who has written a great book called Doughnut Economics. This work also outlines the need to have more comprehensive set of economic measures and much more sustainable growth-related economic goals.