Yesterday’s data showed that the economy wasn’t doing great… but there’s a bigger picture here.
Yesterday, the economy turned a momentous corner.
And not momentous in a good way.
The headline from the Sydney Morning Herald says it all:
AUSTRALIA FALLS INTO PER-CAPITA RECESSION
A “per capita recession”? What even is that? We’ve never heard that before.
Basically it’s economic growth once you strip out the impact of population growth. So if it wasn’t for population growth, and immigration in particular, our economy would be going backwards.
We’ve never bothered to do that before. But now all the papers are doing it. This is a new world.
Australia's economy has slumped into a per-capita recession for the first time since 2006, leaving the country relying on population growth to propel its economy and creating a political hurdle for the Coalition.
The Morrison government has pledged to reduce the migration rate but figures released on Wednesday show that without migrants fuelling consumption, Australia's economic growth would be going backwards.
The Australian Bureau of Statistics data shows the economy grew by 2.3 per cent over the year and 0.2 per cent in the December quarter – below market expectations and well short of Reserve Bank forecasts of 0.6 per cent.
The budget forecast of 3 per cent growth for 2018-19 and the mid-year economic update's revision to 2.75 per cent will struggle to be met, putting a strain on preparations less than a month out from Treasurer Josh Frydenberg's first budget.
The fact that a major paper is leading its reporting of the GDP figures with a comment on immigration shows just what a hot-button topic it is.
And people might be right to wonder why we’re still importing record levels if immigrants when our economy is actually going backwards. People might start to wonder at the sense of that.
Spineless politicians on both sides might look to duck that whole issue and focus on the headline numbers, but there’s not much joy there either.
The headline number was positive, but much weaker than people were expecting, and much weaker than the RBA had been forecasting.
That makes the prospect of rate cuts more likely.
When you break it down by components, you see that growth has been driven by public spending, which was the best performing component.
But that’s not great. It’s saying that if the government wasn’t spending away, the economy would probably be going backwards. You can’t have a government-dependent economy… not for long anyway.
That sounds ok, but when you remember that inflation was 1.8%, it means that in real terms, wages fell by 0.3%.
The figures also showed that average compensation per employee (a fancy term for wages) rose just 1.5% in 2018.
Put all that together, and you don’t have a pretty picture.
Wages are going backwards, on a per-person basis we’re already in recession, and if it wasn’t for immigration and government spending, our economy would be stuffed.
This is not the pre-election snap-shot Scott Morrison was hoping for, I can tell you that.