Josh Frydenberg has again claimed Australia is “outperforming all other major advanced economies” in a Liberal Party missive to supporters which cherry-picks 12 bright spots. Alan Austin details the 12 other things you need to know about Australia’s economic management.
The latest quarterly national accounts – the GDP report – have been the subject of considerable commentary, probably as these are the last before a federal election. Some has been accurate and useful. Much has been neither.
The Bureau of Statistics released on Wednesday a large set of tables with substantial information about the economy. This showed quarterly growth in gross domestic product (GDP) to the end of December 2021 at 3.43 per cent and annual growth at 4.20 per cent. Superficially this looks healthy enough.
It also released a paper titled ‘The Australian Economy: 12 things you need to know about the December quarter 2021’. All 12 items are helpful and accurate clarifications. But they are not the only helpful and accurate notes that should be offered. With an election looming, the following 12 are even more relevant and urgent.
The 12 other things we need to know
1. Total GDP for the calendar year 2021 was just $2,051.1 billion. Sounds a lot, but that is actually poor.
It must be remembered that over the last five years, Australia’s GDP went badly backwards in three quarters and stayed pretty flat in another five. Most of these setbacks were before the Covid pandemic. So Australia has a long way to go to recover GDP lost under current government policies.
2. Total GDP for 2021 was only 2.41 per cent larger than it was pre-pandemic in calendar 2019. That is weak by historic standards. Calendar 2019 was itself a dismal year, with GDP up less than 2 per cent over 2018.
The last time growth over two years was below 4 per cent before Josh Frydenberg became Treasurer was in 1992 during the disastrous early 1990s global recession.
3. Given the strong global recovery from the Covid recession and Australia’s booming exports, 4.2 per cent annual growth is feeble.
France, Spain, Sweden, Norway, Austria, Belgium, and the US recorded more than 5 per cent growth in the December quarter. Italy, the Netherlands, the UK, Singapore and Saudi Arabia grew more than 6 per cent. Hungary, Estonia and Poland expanded more than 7 per cent. Israel, Columbia, Slovenia and Turkey surged more than 9 per cent.
4. Australia’s current annual GDP growth rate at 4.2 per cent ranks a poor 28th in the OECD, close to the lowest ever. (The actual all-time low was 30th in the 2021 third quarter.)
For much of the postwar period, Australia’s annual GDP growth has been in the OECD’s top 10. During the global financial crisis (GFC) Australia was frequently in the best three, topping the table twice in 2009.
5. A satisfactory result would have been quarterly growth of 5.4 per cent and annual GDP growth of 6.2 per cent. That would have returned Australia to the OECD top 10.
6. Trade with China and exports overall have been much stronger through the Covid recession than through the global financial crisis. Through that recession, the highest level exports reached was just 19.6 per cent of GDP in 2011.
This leapt to 20.3 per cent in 2017, then 22.3 per cent in 2018, then surged to 24.6 per cent in 2019. It hit an extraordinary all-time high of 25.3 per cent in 2021.
This should finally kill the zombie belief that trade with China saved Australia from deep recession during the GFC. It didn’t. Rapid extensive stimulus and stable tax revenue did.
7. productivity has flatlined again, for the second time since the Coalition took office. Wednesday’s numbers showed productivity at 103.0 index points, exactly where it was six quarters ago in June 2020, but below last quarter’s peak of 103.8.
Productivity also stalled when Scott Morrison was treasurer, shifting from 98.5 in June 2016 up to just 98.8 in December 2019, an improvement of 0.3 index points in three and a half years. That contrasts with the steady rise of 8.7 index points between December 2008 and December 2013.
8. Josh Frydenberg’s claims about the economy are misleading or false. His email to supporters on Wednesday, with the blue chart, below, made many dubious claims. The assertions we have highlighted in red above are all refuted by the evidence.
Australia’s modest GDP growth and zero productivity increase do not indicate a strong economy. Refer points 1 to 4, above.
9. The Covid downturn was short, sharp and shitty – to use the precise technical descriptors – but nowhere near as severe as the recessions of the early eighties, the early nineties and the global financial crisis. Around 10 developed economies avoided a recession altogether through the Covid crisis. None is still in recession today.
10. Australia is far from “outperforming all major advanced economies”. Australia ranks 28th in the OECD and around 40th in the UNDP list of developed economies. The blue chart, above, shows the correct ranking of those eight cherry-picked economies. But it leaves out the many developed nations well ahead of Australia.
11. Australia does not currently have a low Covid mortality rate. So far this year, Australia has lost 118.5 lives per million population. That ranks 103rd in the world (populations above one million) and eighth in the OECD.
12. It is not true that “a record 375,000 jobs were created in the quarter.” Most of those jobs were not “created”. They are being slowly clawed back from previous disastrous job losses. The government would have us forget that they lost 618,200 jobs in the second quarter of 2020 and another 303,500 in the third quarter last year. The total jobs added over the last two years is a miserable 275,300, very low historically.
Why so many disappointments? Could it be that with an election looming the government knows it will not be challenged by the mainstream media?