Economics Analysis

ABS data spurs media into 'recession' panic

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Reports of a per capita recession are based on uncertain data (Image via Pixabay)

Estimated GDP data released by the Bureau of Statistics has resulted in the mainstream media pouncing on warnings of a 'per capita recession', writes Dr Abul Rizvi.

WEDNESDAY’S Australian Bureau of Statistics (ABS) National Accounts report that in the June quarter of 2023, GDP increased by 0.4% and population grew by 0.7%. As a result, the ABS says per capita GDP fell by 0.3%.

This is now being reported in the media as a per capita recession as per capita GDP also fell in the March quarter.

But given the lag in determining net overseas migration – very preliminary estimates of net overseas migration are only available at this stage to December 2022 – can we rely on the ABS estimates of population growth for the June quarter?

The lag in the ABS’ release of net overseas migration estimates is due to the requirement that for an overseas arrival to be counted in net overseas migration, they must have been out of the country for at least 12 months out of 16 and then must remain in Australia for at least 12 months out of 16 (and vice versa for departures).

The best early approximation of net overseas migration that the ABS publishes is its estimate of net long-term and permanent movements which it publishes with a lag of 1-2 months. For most of the last decade, net long-term and permanent movements have been 10 to 20% higher than the final estimate of net overseas migration.

For the June quarter, the ABS estimates net long-term and permanent movements were 90,140. Natural increase on an annual basis is currently running at around 110,000 per annum or 27,500 per quarter.

Taking these together gives a population growth estimate for the June quarter of 117,640, or around 0.4%. In other words, based on net long-term and permanent movements data, per capita GDP was unchanged in the June quarter of 2023 — not a 0.3% decline.

For the ABS’ estimate of population growth in the June quarter of 2023 of 0.7% to be correct, net overseas migration in that quarter would have to be well over 150,000, or over 60,000 more than net long-term and permanent movements. That is extraordinarily unlikely when overall net international movements in the June quarter (all movements including short-term movements) were negative 323,210.

Net long-term and permanent movements were over 150,000 in the March quarter of 2023 and so per capita GDP declining in that quarter, as the ABS reports, was certainly possible. But then net long-term and permanent movements in the March quarter are almost always significantly higher than in the June quarter. Note that net overseas migration is also higher in the September quarter so a decline in per capita GDP in that quarter is possible or even likely.

In response to my questions on its population growth estimate for the June quarter, the ABS has advised:

The 0.7% population growth figure is a projection in line with recently observed trends. Further insight into the components of population growth feeding into these short-run projections can be found with the Population Clock: Stat Data Explorer (BETA) • Population Clock Component Data (abs.gov.au). Please note that this is not intended as an official statistic. Additionally, this data is in original terms, while the population projections used for GDP per capita are seasonally adjusted.

This response, especially the fact the June quarter estimate of population growth is a “projection”, does not fill me with confidence, especially as the ABS’ “population clock” is a bit of a gimmick given the lag in estimating net overseas migration. The ABS is right to describe the “population clock” as not being ‘an official statistic’.

The ABS should really highlight this uncertainty around its population growth estimates in its National Accounts data and media release given the extent of media reporting of a per capita recession.

Dr Abul Rizvi is an Independent Australia columnist and a former Deputy Secretary of the Department of Immigration. You can follow Abul on Twitter @RizviAbul.

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