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Ross Gittins agrees with me - economy not that bad!

Peter Switzer
7 September 2015

By Peter Switzer

Just in case you think I’m the only one railing against the excessive negativity of the media over our patchy economic performance, and especially after Wednesday’s 0.2% economic growth number, be assured I not the only one.

The Economics Editor of the SMH, Ross Gittins tapped out a balanced look at those growth numbers, which was headlined: “Joe Hockey is right: Economy is neither wonderful nor woeful”.

Yep, he not only took a balanced look at our economic growth figures, like I did, he also gave some support to Joe, just as the media looks like it would love to see his scalp on Tony Abbott’s belt.

Taking a dispassionate analysis of the 0.2% economic growth number for the June quarter, which was expected to be 0.4%, that took the annual read to only 2%, Gittins came up with this: “Combine the two quarters and you get average quarterly growth of 0.55%, or annualised growth of 2.2%, which is probably closer to the truth.”

This is not only better analysis because it is based on a six-month period, rather than three months, but it seems bereft of the usual Tony Abbott hate session that too many Fairfax and ABC journalists think is okay for journalism.

I don’t mind commentary being biased and I know my friends at News Ltd can be Abbott-lovers but I can’t stand economics being twisted to suit political purposes.

I know it’s hard to separate but people like Ross and yours truly have to do our best to be objective, accurate and insightful. We’re not always right but we can’t let our political bias affect our judgment.

Our economy is underperforming but it’s not going terribly. The national economy has grown at a rate of 2% but have a look at how the states are doing: The ACT grew at 5.4%, Victoria grew at 2.9%, NSW at 2.4%, SA at 0.7% and Tassie at 0.5%. Queensland went backwards at 0.8%, WA contracted 2.4% while the NT had a whopping 11.4% pullback.

This looks shocking for our northern cousins but they were booming when the miners were kings and the high dollar they created was KO’ing economies such as NSW and Victoria as dollar-sensitive sectors such as tourism and education lost customers and jobs.

Last week I listed why I think out economy is sneaking forward and this is what I came up with:

  • Interest rates are historically low and bound to stay there.
  • The Oz dollar has fallen from 82 US cents in May to 69 US cents now and we grow faster on a lower dollar.
  • Over the financial year capital city house prices were up 9.8% but Sydney was up 16.2%, Melbourne 10.2%, Brisbane 3.4%, Adelaide 4.5%, Hobart 0.8%, Canberra 2.4% and Perth lost ground by 0.8%. But all up most Australian who own homes were wealthier.
  • The most recent investment figures showed there was the biggest lift in investment plans in five years.
  • Investment outside of mining hit $72.4 billion in 2014-15, which was the best result in three years.
  • Car sales are at a 19-month high.
  • Average wages were up only 2.3% but inflation is under 2% so real wages are actually rising.
  • Consumer confidence as measured by Westpac and the Melbourne Institute rose 7.9% to 99.5 so optimists are now nearly on par with pessimists and that’s a big improvement in August.
  • NAB business confidence was at 8 in June and fell to 4 in July but there were Greek and China concerns over the month.
  • After reading the above numbers the NAB economics team have raised their 2015/16 economic growth numbers to 2.8%, and 3.2% for the year after.

Now it’s possible that the NAB economists could have downgraded their economic forecasts after last Wednesday’s economic growth reading but they might be more influenced by forward indicators rather than one quarter of growth numbers that were mainly pre-Budget and when the dollar was up over 80 US cents.

If the economic tea leaves start telling me that our economy is heading south I will start yelling at the Reserve Bank to cut rates but I have told you for about a year now that I think they have got it right and I’m not changing my tune.

And let me say, if Ross was really negative it would make me rethink my position but he’s not and so I’ll keep believing in the Oz economy and you should too.

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