A “pleasing set of numbers” is what Treasurer Joe Hockey called yesterday’s national accounts, doing his best to put a gloss on an economy that significantly came off the pace in the final quarter of 2013-14. But oddly enough, the Treasurer in reciting many of the numbers we were given yesterday, neglected to mention the most pleasing number of all.
The best measure of private sector labour productivity, Gross Value Added per hour worked, grew 3.3% during the year in trend terms. GVA per hour worked has now grown 9.5% in the last three years, or around 0.8% a quarter, the strongest period of growth since 1997-99. Even taking out the very strong year of 2011-12, when GVA per hour worked grew 4%, it has grown on average 0.7% a quarter over the last two years.
By comparison, the two years in which WorkChoices was in operation — March 2006-March 2008 — saw GVA per hour worked grow by just 2% in total, or on average less than 0.2% a quarter. That was exactly what Treasury predicted to then-treasurer Peter Costello: WorkChoices would lead to reduced labour productivity.
Still, the government, business and the national dailies continue to whine about the need for an overhaul of the Fair Work Act, with business preferring to return to WorkChoices. Why does business want to return to WorkChoices when demonstrably it reduced productivity? Well, WorkChoices allowed businesses to cut wages and reduce conditions, directly improving their own bottom lines. So productivity growth might have come to a standstill under WorkChoices (in fact in two quarters it actually went backwards), but businesses themselves benefited financially. That right there is a nice demonstration of the difference between business interests and the national interest.
Instead of noting the good news on productivity, The Australian Financial Review‘s front page spoke of a “shrinking pie”. On closer inspection, however, the story is more complicated. The “real net national disposable income per capita” data on which the AFR drew its page one lead shows that indeed there has been a fall in net real national disposable income in both 2013 and 2014. Both the fall last year (0.4%) was significantly lower than the 2012-13 fall (1.6%) and if you go back further, you’ll see that since 2009-10, there has been a net 5.7% rise in net national disposable income, including the falls in 2013 and 2014. And that’s the per capita figure — overall net national disposable income fell 0.2% in the June quarter from the March quarter, but was up 1% from a year earlier. So we’re growing income, just not quite fast enough to keep up with population growth.
Fairfax’s Peter Martin also focused on the 0.9% contribution to the GDP figure from stock rebuilding by business. Yes indeed, it would be a concern if businesses simply kept rebuilding stock and consumers weren’t buying. But if you look at stocks over the first six months, there’s a net rise of just 0.3%. In fact, ABS business indicators show that inventories fell 2% over the year to June, so they had negative impact on growth over the year. That is, the rise in inventories in the June quarter came after three quarters of businesses running down their inventories, so a rebound was always going to happen.
And as David Uren in The Australian pointed out, yesterday’s result was substantially better than many had predicted, including Treasury. It’s nine months since Joe Hockey’s MYEFO predicted just 2.5% growth for 2013-14 — a figure some of us argued was ridiculously low — and four months since the budget upgraded that to 2.75%, still well shy of the 3.1% result. And that result, as Uren suggests, should give pause for thought to anyone tempted to buy Joe Hockey’s claim yesterday that revenue was under pressure. Hockey was complaining that commodity prices are tracking well below budget forecasts and putting his budget bottom line in danger. That is, Hockey is suggesting that despite the economy performing significantly more strongly — 0.6 points — than he predicted in his MYEFO, he might be facing revenue difficulties.
Gee Joe, what happened to all that “the government doesn’t have a revenue problem, it has a spending problem” rhetoric whenever Wayne Swan had to front the media to reveal that revenue had had to be written down when he was Treasurer?
Nice use of evidence and logic. Good mental preparation for the upcoming onslaught of dour, respectable commentators who sagely advise that the only way to save the workers is to destroy them.
Great analysis Bernard and Glenn. Thanks for the answers to the Anti News Corp positions!
Good work chaps!
Bernard, prepare for your full house of facts to be trumped by Joe’s pair of ideologies – unions are always bad and working people need more pain inflicted on them to appreciate just how good they have it.
Today the dogs of business are yapping that the solution to youth unemploymenewnt is to get rid of weekend penalty rates (read that would be a good idea for all workers, youth or not, casual or not).
Then it will be the minimum wage, then it will be let them work for tips, then, they will have to pay us to have a job. Sorry, that’s already in with some internships.
Time to man the barricades again…Work Choices Mk11 is on the march.