My Crikey piece on Monday — about the benchmarks Scott Morrison inherited — claimed Australia’s new Treasurer grasped the levers “at a time of strong global recovery”. It asserted that while Australia’s economy has struggled, “the rest of the world advanced strongly, as the global surge accelerated”.
Across social media, these observations prompted queries about the author’s planet of residence, drug of choice and, touchingly, mental health. So, is Australia’s current steep decline part of a global downturn? Or is the world indeed advancing, as claimed? How can we tell? Let Crikey count the ways.
1. Recessions
There are 34 wealthy, developed economies in the Organisation for Economic Co-operation and Development (OECD). Of these, 32 went into recession during the global financial crisis of 2008 and 2009. Australia and Poland were the exceptions. (Recession is defined as two consecutive negative quarters of gross domestic product growth).
By 2012, the number in recession had dropped to 13. By 2013, it was down to eight. In June 2014, only four: Finland, France, Italy and Japan. In June this year, only Canada.
That strongly suggests a global recovery. But wait, there’s more.
2. Economic growth
GDP overall appears to be rising, albeit gradually in most places. The annual rate of growth increased marginally or stayed level in a clear majority of OECD nations in the second quarter of this year. The only declines to 2.0% or lower were Canada (2.0% down to 1.0%), Chile (2.41% to 1.9%), Netherlands (2.5% to 1.8%) and Australia (2.5% to 2.0%).
(Figures are found at tradingeconomics.com, unless shown otherwise.)
3. Unemployment
Across all 34 developed economies, the average jobless rate has declined steadily. In June 2013, the mean was 8.94%. A year later, it had dropped to 8.54%. By June this year, the average was just 8.16%.
Only seven countries had a jobless rate significantly higher this year than two years ago: Austria, Chile, Finland, Norway, Sweden, Turkey and Australia. Incidentally, we have monthly job numbers past June for 27 countries. Of these, a clear majority of 16 have experiences further falls in the jobless rate, another six are level, and just five have risen. They are Canada, Iceland, Mexico, Switzerland and Australia.
4. Deficits
Recorded annually, the latest deficit figures are for 2014. The average for the 34 OECD economies for last year was -2.26% of GDP. This was a much better result overall — assuming low deficits are desirable — than -2.78% for 2013.
In 2014, only eight economies recorded a significantly greater deficit than the year before: Austria, Chile, Czech Republic, Finland, Mexico, Portugal, Sweden and Australia.
5. Debt
All OECD countries except Norway and Switzerland took on greater government debt during the GFC between 2008 and 2011. Some soared spectacularly, such as Ireland, which went from 25% of GDP to 111.2%, and Iceland — from 28% to 93%.
In the last year, in contrast, 15 countries actually reduced their debt, several of them substantially. Ireland sliced its borrowings from 123% to 110%. Poland cut its from 56% down to 50%.
6. Global trade
Whichever measures are used, this has certainly picked up in recent months. The current account surplus — or deficit — measures the value of goods and services a country imports above the value of those it exports. It includes intercountry transfers of interest, dividends and foreign aid.
Current account to GDP ratios are rising globally. Only five OECD countries have had significant falls in 2014, the last year for which we have data: Iceland, Portugal, Slovakia, Spain and Switzerland.
Terms of trade reflect the relative price of exports in terms of imports. This has advanced impressively in recent months. The OECD average (for the 26 countries that record this indicator) rose from 99.2 in mid 2013 to 102.3 in June 2015. Only five of the 26 countries that publish this data experienced a significant decline over that period: Canada, Mexico, Norway, Poland and Australia.
So those six areas suggest that although challenges remain, things are definitely improving. Other variables we could examine include wages, profit increases, infrastructure investment, money supply and, of course, burgernomics.
So why the gloom and doom in Australia’s Fairfax, Murdoch and other media outlets?
First, other numbers are believed to indicate booms or busts, even though they don’t: consumer confidence, business confidence, stock exchange indices and currency values are highly susceptible to the caprices of irrational human behaviour — optimism, hope, greed, pride — and are too volatile to be reliable. Similarly, bankruptcies will go up in boom times as would-be entrepreneurs with more enthusiasm than capital have a go.
The second folly is focusing on just one indicator or just one country, such as power consumption in the USA. These fluctuate routinely, and do not individually track global trends.
The third is media misinformation, which has several motivations. Superficially, bad news sells better than good news. No surprise there. More insidiously, some “news” organisations deliberately misconstrue global conditions to mask political problems at home — or to exaggerate them.
Why does this matter? Because if Australia’s economy is tanking — which it is — then if the world were declining, we might just have to hold on and ride out the slump. If, on the other hand, the world is advancing, then perhaps the causes of local failure are also entirely local.
Talk about shades of cherry picking by someone who doesn’t know how to operate a cherry picking machine.
Alan – you always give us the FACTS!
The problem is, most people can’t handle the truth!!
In your second para, you detail what people said about you, after reading your Monday analysis. The big problem here is that the facts you quote don’t align with what the new ‘god’ Turdbull and Morriscum are saying.
After all, the current government, under any leader, must be right/correct. The bogans (and others who should know better) have now concocted this fairy story about the Oz economy, and heaven help anyone who disagrees.
I find it fascinating that there are no comments so far on this blog regarding these facts!
Hi Alan,
I wouldn’t have disagreed with your first article, and I would only suggest that a fairer summary in the last sentence would be to suggest the causes are possibly “mainly” local, rather than entirely local. We are not in a vacuum, just as we were not in a vacuum when Labor kept us out of recession 2008 / 2009 (while the coalition seemed to suggest that the global downturn would have no effect on Australia, and that Labor just wasted money).
However, somehow, that latter narrative had cut through, and particularly in regional areas, I am surprised by how many people seem to believe that Labor destroyed our economy by keeping us out of recession. As we slide closer to it, may it be realised that recession does cut Government revenues, and that if the stimulus was not carried out, not only would a Government surplus still have been nigh on impossible, but a few percent of the population would have lost jobs and been severely disadvantaged, and chances are that in turn would have led to a slump in property and other asset prices, which would in turn affect the richer or those with more stable employment.
My hope is that the change in leadership in the coalition will indeed move some of the economic levers in the directions that you suggested were necessary early in the week.
Time will tell.
May you mental health be well!
CML you are dead right, the rumblings from the GOP of the south show absolutely no understanding of how to get our economy moving. The real horror for me is when business ‘leaders’ and our supposed government gurus say we need to curb spending, there is not one journalist who asks why.
We need stimulus spending to tackle our unemployment problem. We’ve waited long enough for the ‘wealth creators’ to toss a few scraps our way.
Archibald – the big problem, that no one wants to talk about, is the fact that Turnbull is a ‘wealth creator’ (for himself, that is).
The media and the populace seem to think he has/will change the habit of a life-time.
Fat chance!!