GDP in detail: Australia’s “no recession” run ends

The Australian Bureau of Statistics (ABS) today released the national accounts for the March quarter, which registered a 0.3% decline in real GDP over the quarter and just 1.4% growth over the year.

On a per capita basis, real GDP slumped by 0.7% over the quarter and was flat (0.0%) over the year.

According to the ABS, seasonally adjusted GDP growth for the quarter was driven by falls in household consumption (-0.7%), inventories (-0.2%) and Private capital formation (-0.1%), offset by increased net exports (+0.5%) and government consumption (+0.3%) [note exports and imports are back to front below]:

Quarterly final demand, which excludes export volumes, fell by 0.5% growth over the March quarter, with significant variation across jurisdictions:

In the year to March 2020, final demand growth was also anaemic at just 0.5% nationally (-0.9% on a per capita basis), with varying growth across jurisdictions:

The terms-of-trade rose by 2.9% over the quarter in seasonally adjusted terms despite falling commodity prices:

This rebound in the terms-of-trade helped to support real national disposable income (NDI), which rose by 0.5% over the quarter and by 0.1% in per capita terms:

Indeed, the strong terms-of-trade has meant that growth in NDI has far eclipsed GDP, as illustrated above.

Nevertheless, nominal GDP growth was just 0.8% over the quarter and 3.1% over the year – well below historical levels:

Average compensation of employees fell by 0.4% in the March quarter in nominal terms and was up just 1.9% over the year – still well below average:

However, taking a longer view and adjusting for inflation, real average compensation per employee has fallen by 3.5% since March 2012:

Real GDP per hour worked (i.e. labour productivity) remains stillborn. It rose 0.5% over the March quarter and by 1.4% over the year, but has posted zero growth over the past two years:

Finally, the household savings ratio rose from 3.5% in December to 5.5% in March, which helps to explain why household consumption stinks:

In summary, the Australian economy has now entered a ‘technical recession’, given the June quarter’s growth will also be negative.

Finally, the “no recession” monkey is off policy makers’ backs. That is, unless the ABS sneakily revises Q1 growth upwards into positive.

Leith van Onselen

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