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Don’t fret the GDP score – watch the game instead

Michael Pascoe
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It looks like déjà vu all over again for Scott Morrison as he fears another weak gross domestic product figure on Wednesday, perhaps even a repeat of the September quarter's fall.

That would be a little politically embarrassing so soon after doing the Little Orphan Annie impersonation on budget night, singing a heart-felt Tomorrow and following it up in subsequent interviews with variations on Happy Days Are Here Again and The White Cliffs of Dover.

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Forget the GDP score

The March quarter GDP figure is old news. We already have enough information about the June quarter to know it's bounced back. Michael Pascoe comments.

But beyond the embarrassment, whether the March-quarter GDP score is high, low or indifferent doesn't matter nearly as much as the economic commentariat may presently be indicating.

Thing is, it's the March quarter that everyone is excited about. That's history. ScoMo's budget effort was already May. It's June. We're much closer to the end of the financial year than to how this calendar year started.

Yes, the March quarter probably isn't going to be flash, but we have enough information to know there will be a bounce when the June quarter numbers finally arrive.

So what's the point of becoming too concerned about the past when it's what is ahead of us that obviously is much more important?

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The Reserve Bank governor sounded less than scared in his post-board statement on Tuesday:

"Year-ended GDP growth is expected to have slowed in the March quarter, reflecting the quarter-to-quarter variation in the growth figures. Looking forward, economic growth is still expected to increase gradually over the next couple of years to a little above 3 per cent."

Up a little bit? Down a little bit? Maybe going nowhere at all? Place your bets on the Bloomberg survey's field of 23 economists having a guess.

It all reminds me of the "find the ball" competition that used to run in the newspaper way back when I was a boy. To explain for those of tender years, there would be a photograph from a rugby league game with the ball magically taken out – and this long before Photoshop was even dreamt of. Readers were invited to cut the photo out, mark the position of the missing ball with an X and post their entry back to the paper in hope of winning some minor amount. ("Post" – it involved stamps and envelopes and something called the Post Master General's Department. Oh, never mind.)

The point is that Find the Ball had nothing to do with the game. That was long over. Ditto the March quarter GDP.

I'm wary of indulging in too many sport metaphors – a particular weakness of sad AFL types – but in a totally unremarkable second-grade rugby career there were two life lessons learned by old-school tight forwards: you played the game in front of you; and whatever happened at the bottom of a ruck, you bloody-well got up and ran to the next one.

I don't know about you, but what's happening now and what's likely to happen over the rest of the year is of much greater interest to me than how the year started.

It's a bit like the mistake of becoming too concerned about the Australian Bureau of Statistics measure of non-resources capex. The ABS attempts to count only about half of it and in the process ignores some rather important areas, little things such as health, education, agriculture and software where the main game increasingly is played.

(Instead of demanding "productivity dividends" from the ABS, the government would be better served by adequately resourcing the bureau to provide better coverage for its only genuinely forward-looking survey. The capex figures include estimates of what companies intend to spend next year, but only for the aforementioned half of what matters.)

Even within the game of guess-the-headline-real-GDP-number, there are relevancy weaknesses. For example, much is made of the impact of Cyclone Debbie in delaying coal exports. NAB economists report metallurgical coal export volumes were down 3.7 per cent in the March quarter on the previous corresponding period and the June quarter also will feel the impact – but the price of Queensland and NSW coal went through the roof. The real world income impact of the GDP-lowering event was somewhere between stuff-all and a positive, never mind what rebuilding after Debbie does, the lift already seen in April Queensland retail sales.

Games are played on the positive side as well. A reason to be more optimistic about GDP scores in the new financial year is that mining industry capex has finally bottomed. Among the capex figures, AMP's Shane Oliver notes the bit that feeds directly into GDP calculations "building and equipment" fell by 0.1 per cent in the March quarter. The way the system works, that's actually a positive as on a full-year basis it washes out a fall of 0.5 per cent in the previous March quarter.

So if the March quarter national accounts are mainly a matter of historical interest, what counts in the year ahead?

Well, statistically, mining will be back to normal and no longer a drag. Anecdotally, the need for maintenance investment in resources could prove a little positive.

Housing construction is peaking, but the inevitable downturn is more than compensated for by an infrastructure construction boom that is yet to be fully reflected in the numbers.

There has long been a disconnect between household consumption and retail sales. That disconnect is becoming greater as we spend proportionately more on services and non-retail pleasures and necessities – education, education, housing, international travel, energy.

Our services industries continue to move forward very nicely indeed. Education is in for a bumper year, partly thanks to Donald Trump encouraging more foreign students. We in the early days of a tourism boom if only we can be smart enough to invest to service it.

We still have the two major failures of government to deal with – the lack of tax reform and carbon policy. But our federal muddling-through is being underwritten for the next few years by the states' infrastructure investments and population growth.

The game ahead is still positive, whatever the March quarter score might have been. The future of the code though (I know, I know, another sporting reference) remains up for grabs with no sign of a competent captain coach in the club.

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