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The unknown recession
Australia may have enjoyed more than 25 years without a recession, but as Peter Martin explains, it's been a close run thing.
The so-called partial indicators released by the Bureau of Statistics ahead of Wednesday's national accounts have company profits climbing 6 per cent during the March quarter and wages only 0.3 per cent.
The wage measure is affected by both record-low wage growth and a drop in the number of hours worked.
Mining profits jumped 13 per cent in the quarter and non-mining profits 2.4 per cent. Retail profits were up 4.9 per cent, manufacturing profits up 2.4 per cent, utilities profits up 2.1 per cent, and wholesale profits down 5.8 per cent and finance industry profits down 2.8 per cent.
JPMorgan analyst Tom Kennedy said that, although strong, the March quarter boost in company profits would have little impact on real gross domestic product as it was mainly the result of a boost in prices rather than a boost in volumes. Commodity prices had since since swung hard in the opposite direction.
Wage growth was so weak that the savings rate would have to fall further if consumption growth was to remain healthy.
"In real terms, wages and salaries are falling, something that fits with generally downbeat views on the Australian consumer," Deutsche Australia chief economist Adam Boyton said.
On balance the partial indicators are regarded as positive for Wednesday's March quarter GDP, with few economists continuing to forecast a negative number.
The bureau's measure of inventories grew by a bigger than expected 1.2 per cent in the quarter due largely to buildup of iron ore and coal stocks as shipments were delayed by bad weather and the Chinese New Year.
While the boost in inventories is expected to add 0.4 percentage points to GDP, the hit to exports is expected to subtract 0.6 points.
The ANZ has warned of upside risk to its forecast of a 0.1 per cent fall in GDP, UBS is sticking with its forecast of growth of 0.2 per cent, Deutsche is sticking with 0.3 per cent, and JPMorgan is sticking with 0.4 per cent.
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