The numbers look good. So why aren’t we more excited?
We got March quarter GDP data, and unless I’m missing something, they actually look pretty good.
GDP was up 0.8% in the quarter and by 3.3% over the year, easily besting economists’ expectations for a 3% growth rate.
But despite the solid headline numbers, incoming Treasurer Jim Chalmers wasn’t putting any lipstick on the pig:
Treasurer Jim Chalmers has reset the economic narrative, labelling a solid quarterly economic growth figure and booming national income as “weaker than expected” and warning of “big challenges” ahead for the economy.
Economists variously labelled the result “very strong”, “strong”, “solid” and “firm”, but Dr Chalmers used his first national accounts press conference to describe the result as “weaker” than the budget forecasts and “a snapshot of the really serious constraints and challenges that we have in our economy”.
Although he acknowledged that parts of the economy were “robust” and “resilient”, including the unemployment rate at a 48-year low of 3.9 per cent, the treasurer sought to focus attention on the “big challenges” of inflation, falling real wages, rising interest rates and worsening cost of living.
He cited petrol prices – up 12 per cent since the end of April; wholesale electricity prices – up 237 per cent, and household power bills set to rocket; and gas prices – up more than 300 per cent over recent years.
I mean, every new government does this. Every new government goes, “Omg! Look at the dumpster fire we’ve inherited. Those last guys were total clowns. Oh well. Sorry. Can’t pay for that stuff we promised now.”
So there’s a bit of that.
But there are definitely some challenges ahead. As I noted last week, soaring electricity prices are going to give the economy quite a “shock”.
(If you’re the 100,000th media pundit to drop that pun you win a free hamburger.)
But never-the-less, the March quarter data show us entering the electrical strom in pretty good stead.
The household savings rate has come off a touch, but still suggests households, on average, are sitting on a nice pile of cash.
In fact, the latest deposit data shows households have stashed away almost $270 billion since January 2020.
(My mattress is certainly lumpy I can tell you.)
That savings war chest, in turn, is helping consumer spending hold up, with discretionary spending (on stuff you don’t really need) now back above its pre-pandemic level.
And Aussie exports are still booming along thanks to the ongoing commodities boom and energy price spike. Export prices are at record highs.
Which is funnelling money into mining companies by the truckload. In fact, mining industry profits are now more the entire non-mining economy. Nuts.
And the public sector continues to provide strong economic support, with the public sector’s share of the economy close to record highs.
Now it is true that at some point we’re going to have to wind that public sector back a bit, and the outlook for exports could get wobbly if things in China or Ukraine get worse.
But then again, there’s always something. There’s always dark clouds in the sky somewhere.
So look, all we have is what we know. And what that tells us is that things look good. The economy is pumping along pretty well.
Let’s take our wins when we can find them.