Alan Kohler has one of those pieces today that mystifies unnecessarily:
…economists are puzzling over Australia’s weak jobs growth, which is happening despite a much stronger-than-expected bounce in GDP.
We’ll find out later today, but all the recent data, including yesterday’s stronger-than-expected retail sales, suggest that GDP grew more than 1 per cent in the September quarter, or 5 per cent annualised. The Australian economy, would you believe, is booming.
But employment is going backwards, down about 15,000 in the quarter; in net terms 4000-5000 people per month are losing their jobs. The discrepancy can be partly explained by the strength of net exports, which, we learned yesterday, added 0.7 per cent to GDP in the quarter thanks to a big decline in imports.
…With the dollar “uncomfortably high”, as the Reserve Bank repeated yesterday while leaving rates on hold, Australian firms are under enormous pressure to get costs down or go out of business.
In the context of a strong exchange rate caused by weak currencies elsewhere and relatively high interest rates here, Australian firms are uncompetitive. They can’t reduce wages so they are automating, replacing human beings as fast as possible.
…Publishers, manufacturers, the public service, banks are all rapidly downsizing. Retailers that once resisted online shopping, extolling the virtues of bricks and mortar, are now racing to build internet sales because the margins are higher.
What economists are puzzling? Many, led by MB, have been forecasting this for two years. It’s quite straight forward. Growth based upon net exports is less labour intensive than growth based upon investment. As well, we’ve got a cyclical bounce underway after a few years of cost cutting and before any turn in employment.
If it were the rise of the machines we’d be seeing some great surge in productivity as well, which we’re not, though it’s improved some.
Also, even if growth does outperform today, and consensus is for 0.7 not over 1%, then annualising that to 5% makes no sense. There are always ebbs and flows in different quarters. We’re not in a boom and Arnold Schwarzenegger is not about to break down your door, sorry.
