The drip of bad economic data has been fairly steady of late, but yesterday it briefly turned into a torrent, enough to suggest that the Great Morrison Stagnation could be becoming something even worse.
Where to start? Australian Industry Group’s Performance of Manufacturing Index fell sharply for November, “driven by contraction in employment and new orders and sales and production were barely steady”.
AIGroup wants fiscal stimulus, stat, saying “the stimulus from interest rate reductions and the income tax cuts has not so far flowed through to consumer and business spending”.
The ANZ job ads series also emerged, showing a 1.7% fall in November and a 12.6% decline in the year to November.
Then it was the ABS’ turn. Dwelling approvals were down — yet again. The first sentence of the statistics bureau’s press release was “the number of dwellings approved fell 0.8% in October 2019, in trend terms, and has fallen for 23 months”.
Everything fell — houses, apartments, non-residential, even renovations. Total dwelling approvals are down nearly a quarter over the year to October, seasonally adjusted. It’s not clear if the bottom is in sight yet — dwelling approvals are a forward indicator of construction yet to commence.
Next: business indicators for the September quarter. That showed retail sales volumes down 1.6%, the biggest fall ever. Wholesale sales volumes were down for a second quarter. Inventories down 0.4%. Profits — which have been performing relatively well — down 0.8% seasonally adjusted. None of those will help an already insipid September quarter GDP number tomorrow.
The only upside for the quarter was, as we know, that strong iron ore prices have driven a mining investment boomlet, with mineral exploration spending up around 5%, much of it in Western Australia.
The Reserve Bank — which has so far persisted with its “gentle turning point” rhetoric — indicated last week that it is reluctant to further cut interest rates until it has a good handle on what the most recent round of cuts has delivered. That’s left little expectation there’ll be any movement at today’s meeting. But the spate of bad data yesterday will encourage economists and the commentariat to further heights of speculation about a rate cut at the Bank’s first meeting of 2020, in early February, especially if tomorrow’s GDP result suggests the “turning point” was for the worse, not the better.
But whatever the headlines about GDP and rate cuts, the ABS also yesterday revealed the extent of a more fundamental problem: Australia’s productivity is not merely not growing, it’s going backwards.
In 2018-19, multifactor productivity (MFP) in the market sector of the economy fell for the first time since 2010-11. And labour productivity (LP) fell for the first time since the ABS began collecting the relevant data when Paul Keating was prime minister.
Part of that fall can be put down to a strongly growing labour market in a tepid, low-demand economy — more people are in work, but overall output hasn’t grown to reflect that because households aren’t spending. The drought is also playing a role — it has smashed agricultural productivity. But there’s no gainsaying the trend of recent years of declines in both MFP and LP.
Labour productivity, which boomed under the Gillard government, has been declining since the Coalition came to power and has now, finally, gone negative. If this isn’t a productivity crisis, then it’ll do nicely until a real one arrives. And no interest rate cut or fiscal stimulus will fix it.
Meanwhile in Canberra, the government is obsessed with “union thugs” (whilst calling, hilariously, for “cooperative workplaces) and a budget surplus that can be measured not just in net inflows to Treasury but higher unemployment, lower growth and wages growth barely above inflation.
If the stagnation deepens into something worse, at least the culprits will be clear.
Is the government missing the big picture on the economy? Is Australia heading towards a recession? Let us know your thoughts at boss@crikey.com.au. Please include your full name to be considered for publication.
Its no wonder Josh Frydebrain ans Scomo say the economy is going well, its going right where they want it to go, wages down, interest rates down,spending on social services/heath/education down, unemployment /poverty and homelessness up, political awareness and voter intelligence at record lows its a conservative governments dream.
It’s a neoliberal dream. I don’t think one should describe the Illiberal Party as conservative. They’re not much interested in conserving anything.
How good is Australian business management and their political dependants?
“Funny” isn’t it?
They returned this government but the electorate doesn’t trust it’s attitude to IR enough to spend tax cuts to stimulate the economy? They’d prefer to keep their money for a rainy day/pay down debt – out of fear of losing what (underemployed?) jobs they have?
You make a very good point, referencing the collective cognitive dissonance of our dear fellow citizens.
Stagnation is the great unstated central policy plank of this Muppet government. It must be given that they have been at the wheel since 2013 and everything economic has trended down since then. And that is ignoring social justice, social equity, transparency and ethics – all have trended down for over 6 years.
Surely it is obvious that if we piled into renewable energy, energy storage, hydrogen production and general energy R&D that would arrest the economic decline at least. I have heard no refutation of Ross Garnaut’s claim that Australia could, relatively easily, become the cheapest producers of new energy in the world and that would facilitate the re-industrialisation of Australia. All it will take is vision and leadership. But alas, this idiotic government obsessed only with pleasing its donors in mining and finance, has no vision and none of the courage needed for authentic leadership.
You mean ‘abandon underwriting the profits of coal donors’? …… But what would happen to civilisation as we know it? Or, more importantly, the slurry of coal, funding the Coal-ition government?
………. Funny to think that if we could get rid of one – we’d be shot of the other too?
SloMo is a man empty of any ideas except his obsession with religious freedoms(?), union thugs and the sacred small surplus.
Peter Wotton
peter.wotton@gmail.com
The LNP’s monotonous mantra that tax cuts will generate jobs has proven to be a failure of attempted economic management. Remember Turnbull and Morrison as Treasurer, patronisingly and simplistically explaining that tax cuts gave people money, people will spend, business will then be in a position to create more jobs.
The historic withdrawal of weekend penalty rates by the FWC, it’s alleged justification and the consequent failure of the Hospitality Sector to hire more people, was the first local evidence that the LNP’s simplistic understanding of the economy was a crock.
The LNP persecuted Emma Albericci for daring to write an article that showed there was no international evidence that tax cuts generated jobs.
No mainstream media journalist dares to raise this in any economic discussion. The notion is given massive media coverage when the LNP are spruiking it as their core economic strategy. The media moves on, satisfying themselves with other, ‘more current’ newsworthy items. Hey, look over there, everyone’s talking China!
It seems journalists and their editors are petrified of being accused of being partisan if they raise the ineffectiveness of recent past policies or statements. So they resort to sitting on the fence, preferring to offer moderate accounts of blow-by-blow politics in parliament, rather than communicate deeper, analytical exploration of a subject, policy or party ‘group think’.
Recently, Fran Kelly on Insiders blithely repeated Frydenberg’s lie from his interview / last election that the ALP were proposing $387BILLION in tax increases, a ludicrous figure that Treasury publicly refused to endorse. Analysis by some of Kelly’s peers in Guardian Australia and others showed the $387BILLION was calculated by saying that since the ALP were not endorsing the LNP tax cuts of $230BIllion, then $230Billion should be added to the ALP’s figures, and ignore their revenue raising policies.
If followers of Federal Politics know this, Fran Kelly must have known. But journalists seem content to run with whatever phrases the political class and their acolytes promote.
Bad economic news IS everywhere. One not mentioned is that national GST revenue is down compared to last year, underpinning that households are not spending.
How does the media allow these boofheads to begin to pretend they are economic managers?
Dozy Fran Kelly exhibits quite the innate disposition for battering Labor with Coal-ition assertions, that she hasn’t bothered ‘exploring’.
I’ve long wondered how Fran Kelly has gained any credible reputation at all, or why the ABC persist with her let alone promote her.
I find her proclamations vacuous, at best.
Can only agree DB. Kelly is a radio trained talking head with little interest in the art of drawing out from her guest content that do not wish to share or; content that they had not realised was of real interest to viewers. Kelly loves the sound of her own voice. Insiders is no more.