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These are strange economic times. Some measures look scary, while others are booming.Greg Jericho

We lives in a strange economic era. In the three months leading up to September, Australia’s economy shrank 1.9%. This is the third biggest drop in the quarter, but it’s still pretty overwhelming and I feel it’s rather good news.

By the time GDP figures were released, economists had predicted a 3.1% drop in the September quarter, so when the Statistics Bureau revealed a “just” 1.9% drop, that’s not the case. There was no. Seems too bad:

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Compared to 12 months ago, the economy is about 3.9% larger, well above the long-term average and an indicator of the current strange situation. Things are horrifying in one sense and booming in another. ..

Recall that the way we measure the economy depends not only on what we count, but on how long it counts.

If you only care about three-month chunks, these latest figures show that the economy has collapsed and is about 4% below where long-term trends should be given.

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But when Australia counts GDP as the amount it produces in 12 months, in the last three months our economy has actually grown (although only 1%), and it’s a slow, long-term trend level. Will continue to recover.

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This shows that when the times are out of order, it is best to look at things from different angles and utilize as much perception as possible.

For example, during a parliamentary question time on Wednesday, the debate between Labor and the coalition discussed how Australia works compared to other OECD countries.

Workers pointed out very correctly that Australia had the worst growth in the September quarter across the OECD. However, treasurers argued that Australia was superior to most G7 countries when compared to pre-pandemic levels (if it was nearly in the middle of the OECD on this measure).

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So what was the cause of the decline in GDP? Well, you don’t have to be a lot of economists to know – the blockade of New South Wales, Victoria and ACT:

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The impact of the blockade was so great that household consumption collapsed in New South Wales, Victoria, and ACT alone, reducing GDP by 2.7 percent, but with the same spending in all other states. Increased by 0.2 percentage points.

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After all, the biggest driver of GDP growth in the September quarter was a decline in imports, a 4% decline, so lower household spending also contributed to GDP. Imports are effectively leaving the economy, so when imports decline, GDP grows.

The collapse of household spending also caused the second-largest rise in savings rates – rising from 11.8% in June to 19.8% today. If you can’t go to the store or on holidays, you can save even more.

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Another major impetus was government spending. Without government spending and investment, GDP would have fallen 2.8% instead of 1.9%. Similarly, almost half of all economic growth over the past year comes from the public sector.

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This also applies to household income. In the September quarter, real household disposable income per capita increased by 4.2%, 60% due to increased social benefits during the blockade.

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One area of ​​government support that appears to be mitigating is for the housing construction sector. Sure, the blockade had an impact, but over the past six months, homebuilding, and home remodeling and additions, have declined from the peak of the homebuilding period.

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And now we are looking ahead.

Household spending could surge in southeastern states in the December quarter, but government support will also decline.

This is undoubtedly a bright government, with near-record GDP growth likely to be seen again three months after March (perhaps just before the elections).

But we have to wait again to confirm the true health of the economy. Eventually, you’ll reach a point where blockade and virus restrictions aren’t producing strange and somewhat unrealistic numbers for a continuous period.

These are strange economic times. Some measures look scary, while others are booming.Greg Jericho

Source link These are strange economic times. Some measures look scary, while others are booming.Greg Jericho

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