Of all the expenditure cuts by the Federal Government, cutting employment in the Australian Bureau of Statistics (ABS) has to be among the most reckless. As reported in the SMH overnight, 100 jobs are to be axed as the ABS tackles a $50 million budget black hole and an increased efficiency dividend.
At this stage, the ABS has not announced which programs and surveys will be cut. When the former Labor Government cut funding to the ABS by $20 million during the GFC, it reduced the scope and sample size of the both the Labour Force and Retail Trade surveys, significantly reducing the reliability of the seasonally adjusted figures. It also ceased the job ads survey, whose impact can clearly be seen in the next chart, whereby data is missing for the crucial post-GFC period. Thankfully, all surveys were later reinstated to their former glory.
Timely and accurate data is key to good decision making, and the cuts to the ABS workforce risks hampering the Government’s ability to formulate policy, as well as the Reserve Bank of Australia’s (RBA) ability to accurately read the economy and formulate monetary policy. It is a retrograde move that will provide minimal immediate cost savings at potentially great cost to the Australian economy, as argued today by Callum Pickering:
Federal governments – of both the Coalition and Labor persuasions – have been incredibly short-sighted when it comes to the ABS. Here is an organisation that is paramount to good decision making. The Reserve Bank of Australia, governments, banks and government agencies across the country rely on the ABS, yet the agency continues to be squeezed to the point that the quality of its output is threatened.
Every month the RBA meets to make a policy decision that affects millions of Australians – and it is mostly determined by ABS data. How comfortable are you with the RBA making those decisions using less reliable data?..
In July 2008 the ABS reduced the sample for the retail trade survey by 59 per cent and the labour force survey by 24 per cent…
At the time I was at the RBA, as its household sector analyst, and for a brief period we were almost completely in the dark regarding the household sector. Highlighting how short-sighted the Rudd government was, these cuts occurred just as the rest of the world was falling into the largest economic crisis in eighty years…
If the government had greater perspective it would actually look to boost the ABS budget. We are one of the few developed countries that does not have a monthly measure of inflation. The ABS also releases its first read on gross domestic product over a month later than the likes of the United States. The RBA would certainly benefit from having more timely data.
Hopefully, cooler heads will prevail and the ABS’ budget will be restored. Otherwise, the RBA and policy makers will be left in the dark during what is likely to be the greatest structural adjustment affecting the Australian economy since the early-1990s recession.
