We expected an economic turnaround, but not this swiftly

The latest official statistics confirm Australia’s economy is back among the world’s leaders, as Alan Austin reports.

*Also listen to the audio version of this article on Spotify HERE.

AFTER NINE YEARS as one of the biggest losers on economic growth, Australia is back in the developed world’s top ten. It has skidded in sideways at high speed with a bunch of red-hot export reports and draft trade deals in one hand and a bottle of champagne in the other. Australia has not just joined the OECD’s top ten — it stormed in at number four. Only Ireland, Iceland and Colombia – which all have highly volatile economies – have higher annual rates of growth of gross domestic product (GDP). See grey and blue chart, below.

Australia’s September quarter figures – released by the Australian Bureau of Statistics (ABS) last Wednesday – show GDP growth for the three months to September was 0.65% for the quarter and a thumping 5.87% for the year. (ABS File 5206, table 1).

They expose recent doom and disaster predictions by the corporate sector and the Coalition’s struggling Shadow Treasurer as hollow and mendacious.

Surprising surge in growth

This is a phenomenal turnaround. For the last nine years, the waste, corruption and sheer incompetence of Coalition administrations have seen Australia languish in the bottom half of this OECD table. Just three months ago, the June quarter figures showed Australia’s annual GDP growth ranking 22nd. A year ago, Australia ranked 30th.

September’s is the strongest annual growth since 1987 and 1988 in the Hawke/Keating boom years, apart from the aberrant second quarter of last year, which bounced back from the pandemic lockdowns.

Productivity improving — perhaps

Productivity is the calculation of GDP generated per hour worked over the whole economy. This increased marginally from 99.5 index points to 100.1 in September, following three years of stagnation. It’s not a great start, but it’s a start.

Living standards rising

A handy measure of the quality of family life is household consumption expenditure. This is the money families or individuals have available to spend on necessities – and a few luxuries, we hope – after paying all direct taxes. Obviously, the more spent the higher the standard of living in most cases.

This variable rarely declines except during times of severe global recession, as happened in the early nineties recession and the Global Financial Crisis (both marginally) and during the COVID pandemic (severely).

Unfortunately for Australian families, this also went backwards twice during the Coalition boom years, with no explanation other than mismanagement.

September’s number was $287.2 billion, which was up an impressive 11.8% from $257.0 billion last September.

Chalmers’ challenge just got a whole lot scarier

The latest official data on Australia’s economy reveals serious structural problems making all workers poorer.

Share of national income going to workers

Australia’s total income continues to rise as exports expand and commodity prices remain strong. Total factor income – the measure of national earnings the ABS uses – hit a new record high in the September quarter at $558.9 billion. (ABS File 5206, table 7).

The share going to wage and salary earners has declined disastrously from 2016 to June this year, as shown here and here. Fortunately, it picked up in the September quarter from 48.83% of total factor income to 50.18%. Not much, but it’s a start.

The first target should be to get back above 53%, which is where Labor left this in 2013. Unions and others should then push for higher levels, recalling that this was above 60% in the Whitlam and Fraser years.

Wages growth

The wage price index rose 1.0% in the September quarter and 3.1% annually, according to the latest ABS data.

The ABS report said:

“This is the highest quarterly growth in hourly wages recorded since March quarter 2012. ...this growth was primarily driven by increases in wages for the private sector which grew at twice the rate of wages in the public sector.”

This was largely the result of effective union advocacy and the largest Fair Work Commission award increase in more than a decade.

Inflation persists

Economists have been divided on whether the current surge in inflation in most countries is a global phenomenon or the result of each affected economy suffering the consequences of mismanaging the COVID pandemic in similar ways. The consensus now is that global pressures are critical, including the energy crunch triggered by the Ukraine war.

Only two OECD countries still have inflation below 5% — Switzerland and Japan. The average of all 38 member countries is a disturbing 11.1%.

Australia’s 7.3% now ranks 11th. This is a big improvement on 32nd, which was the situation in June last year.

Debt and deficit getting sorted

Australia’s budget deficit for the year to date to the end of October was -$20.7 billion. This is vastly better than -$43.9 billion in October last year, or the disastrous -$103.5 billion in October 2020. The latter number, of course, is partly attributable to the pandemic.

Net debt was $533.5 billion in October, an improvement of $75.9 billion on the $609.4 billion net debt earlier this year.

Buoyant trade

Exports have set new records since the May Election as fractured relations with regional neighbours and trading partners have been repaired. Monthly exports exceeded $60 billion in June for the first time, repeated in September and October. Australia’s balance of trade was $12.22 billion in October, the highest October level on record.

More remains to be done to restore Australia’s wealth, income and fairness after nine years of gross mismanagement. Persistent problem areas, besides inflation, include wage levels, job training, job participation, keeping students in education, over-employment of seniors and the gross debt.

We shall monitor these in the coming days. But right now, just one glass of bubbly is in order.

*This article is also available on audio on Spotify here: