September quarter national accounts: Experts think GDP went backwards
Financial market analysts believe the economy went backwards immediately after the July election, ending five years of continuous economic growth and calling into question the government's repeated election promise to "deliver jobs and growth".
The Bureau of Statistics will release the September quarter national accounts on Wednesday at 11.30am. Most of the 26 financial market economists surveyed by Bloomberg late on Tuesday expect the Bureau to report that the economy had gone backwards. The "median" or middle forecast is a fall of 0.1 per cent.
The Commonwealth Bank is expecting tepid economic growth of 0.1 per cent in the quarter. The ANZ is expecting the economy to shrink by 0.1 per cent. Westpac and the National Australia Bank are expecting it to shrink 0.2 per cent. Macquarie is "reluctantly" forecasting a slide of 0.3 per cent.
Curiously, one of the reasons the banks give for the economy going backwards in the September quarter is the election itself. Government finance statistics released on Tuesday show that in the three months before the election public sector spending swelled 4.8 per cent. In the three months after it, it shrank 2.4 per cent as pre-election spending was withdrawn, hitting economic growth.
Reserve Bank Governor Philip Lowe says 'some slowing' in economic growth is likely before a pick-up next year.Credit:Ben Rushton
Trade figures, also released on Tuesday, show that imports grew faster than exports in the September quarter, by what the Bureau said was enough to detract 0.2 percentage points from economic growth.
Even before Tuesday's news, growth in the quarter as looking week. Business investment figures released on Thursday showed mining investment slid 7 per cent in the quarter, manufacturing investment 5 per cent, and services investment 2 per cent.
Wage growth figures were the weakest on record - just 1.9 per cent over the quarter. Retail sales were also weak, falling in seasonally adjusted volume terms. Sales picked up in October and the Reserve Bank's business liaison program indicates they picked up further in November, but neither of those months will feed into the September quarter growth figure to be released on Wednesday.
Reserve Bank governor Philip Lowe acknowledged in a statement released after Tuesday's board meeting that "some slowing" in economic growth rate was likely, before it picked up again in the new year.
The bank expected further increases in resource exports as completed projects came online. The outlook for business investment remained "subdued", although in answers to questions, business owners said they were confident.
The bank decided to leave interest rates on hold at the meeting awaiting the Wednesday economic growth figures and other developments expected over the next two months, including an expected interest rate rise by the US federal reserve, the inauguration of president-elect Donald Trump in January and the release of updated inflation figures. The board will reconvene in February.
The economy has gone backwards only once since the global financial crisis in 2008. In the March quarter of 2011, it slipped 0.2 per cent after floods in Queensland disrupted exports.
Commonwealth Securities chief economist Craig James said if the economy did go backwards it would "serve as a wake-up call for Australia's politicians".
"The message from consumers and businesses is that the major parties need to flesh-out reforms, especially on taxation, that will give Australians confidence to spend, invest and employ," he said.
Attention in official circles is turning to whether the expected fall will be a one-off. If a slide in the September quarter is followed by a slide in the December quarter, the outcome will be described by many as a "recession". In fact there is no such official definition of recession, and it would be possible for Australia to endure two quarters of negative economic growth without the hardship normally associated with a recession.
The assessment of the Treasury will be reflected in its mid-year budget update, to be released on December 19.
Peter Martin was economics editor of The Age between 2014 and 2018. He is a former Commonwealth Treasury official and a visiting fellow at the Australian National University.