Australia’s weakening economy

Tonight, just a scan with a focus on economic statistics.

In a post (Should We Have Children?) Ramana referred to something that I hadn’t thought of, the impact of education debts on relationships and the decision to have children. I have written before on the very significant impact that the changing pattern in relationships has on other variables. As a simple example, by 1980, it was clear that the rise of two income families was reducing labour mobility because the need to earn two incomes, to have two careers, meant that couples had to take both careers into account before a move.

Yesterday, the Australian Bureau released the last of its series Employee Earnings, Benefits and Trade Union Membership, Australia, August 2013. One take home statistic: “Real (earnings adjusted by CPI) median weekly earnings in main job fell by 2.1% in the year to August 2013, the largest fall in a decade.” Mmm! That would fit with my observations.

That same day, the ABS released the Australian GDP figures for the March quarter 2014 showing a seasonally adjusted rise of 1.1 per cent for the quarter, up 3.5 per cent from the March quarter 2013. That’s a good result. However, the main driver in the rise was net exports, up 1.6 per cent. In industry terms, mining contributed 80 per cent of the growth in the quarter, The two results are linked, since rising export volumes of mining products was the main contributor to net exports,

Today, the ABS released the trade figures for April 2014 showing a biggish seasonally adjusted decline in trade terms. The main driver in the fall was coal, coke and briquettes, down $361m (10 per cent).
This fall was partly offsetting by metal ores and minerals, up $254m (3 per cent).  Since April, iron ore prices have come down suggesting that the trade figures may have deteriorated further. Oops! Building approvals have also continued to decline after a period of steady increases.  Then, in May Australian house prices fell by 1.9 per cent,the biggest single-month decline in house prices in more than five years, according to CommSec chief economist Craig James.

Finally back in May, the ABS released Australian Industry, 2012-13. It’s worth a browse.

In November last year, I was prepared to take something of a then contrarian view of 2014, suggesting the Australian economy was going to be strong than many expected. I held to that view in December - Friday Economics- economic outlook 2014. I’m not so sure now. I think that Australia may have stuffed up, despite the better than expected global economic growth. There have been too many shocks, too much instability.

I won’t call recession yet. That would be extreme. But it does look possible now, something I hadn’t expected I think that we will find out relatively quickly.

Update

Yesterday, Leith van Onselen had a useful piece showing that while GDP went up in the March quarter, Gross National Expenditure went down after really flat lining for the year. Today, he followed this up with a piece  looking at the expenditure numbers adjusted for population increase. Australia’s population has been growing, so the per capita numbers are in negative territory.

Meantime, Chinese growth continues to weaken slightly, with the IMF advising against new stimulatory measures. The Chinese Government faces a difficult task in unwinding imbalances in the Chinese economy, so some further slowing is not necessarily a bad thing.

Yesterday, Roy Morgan released the results of its latest survey of business confidence. The survey was carried out following the budget. Business confidence in May fell 5.5 per cent from April to 114.3. Business confidence is now 16.1 per cent below the peak of 136.3 in October 2013 following the new government and 7.4 per cent below the average over the last 12 months.