Australia’s Ute-Fuelled Economy Leads the World
Last Wednesday official figures showed that Australia’s economy is growing at 3.1% annually.
This is consistent with Treasury’s prediction in the budget papers which was greeted sceptically by professional economists.
The impression often given by commentators is that Treasury plucks its forecasts from the air but they are based on surveys of business that comprise a very large sample.
Treasury boss John Fraser knows the value of good information from his time as the head of one world’s largest funds managers and, as a consequence, he has dispatched Treasury officials around the country to gather information about the economy so it’s no surprise that Treasury seems to be getting its forecasts right.
Scott Morrison is therefore entitled to take some credit for the latest results.
As he announced growth for the March quarter of 1% the Treasurer told journalists:
“Australia has climbed back to the top of the global leaderboard, leading the major advanced economies of the world, bettering the average growth of the OECD and all G7 nations once again. Importantly, today’s results validate our budget forecasts and confirm the strengthening economic outlook we presented in the budget just a few weeks ago.
“Today’s figures show growth was broad-based with all components contributing to growth in the quarter, including household consumption, new public final demand (government spending) and net exports.
“Over 1 million jobs have been created under the Coalition government and having more Australians in work is having a great impact on our economy.”
Although analysts said that consumption was flat and that consumers were preferring to pay down debt rather than spend, the Treasurer disagreed saying:
“Household consumption grew by 0.3 per cent in the quarter and is 2.9 per cent higher than a year ago. This has been driven by increases in 15 of the 17 consumption categories over the past year. Over half of our annual growth has been driven by household consumption.”
The Treasurer also disputed the notion that wages were stagnant.
He cited the accounts to show that compensation to employees had grown by over 5% for the year to date.
“Compensation of employees recorded solid growth of 1.2 per cent in the quarter and is up 5.1 per cent over the year. This is the strongest annual result seen in almost six years.
“Over 40 per cent of the increase in the quarter and around a third of the annual increase is being driven by employees earning more – or an increase in average wages. Today’s results show that not only are more Australians in jobs – they are earning more in those jobs.”
Mr Morrison said that evidence that the economy was on a surge was the number of utes driving around metropolitan and regional areas with phone numbers on their sides.
He said dealers were selling more utes, businesses were buying more utes and that this is evidence that the sectors where the tradies were working were booming.
Treasury estimates that new non-mining business investment grew by 1.8% in the quarter and 10.0% through the year.
Non-mining investment has grown for eight consecutive quarters, the longest continuous growth since before the start of the mining investment boom.
New machinery and equipment investment grew for the fourth consecutive quarter to be 9.3% higher than a year ago.
This is the highest annual growth rate since the peak of the mining investment boom in 2012 and twice the long run average and is being driven by utes and other commercial vehicles.
The signs for the economy are positive even without the stimulus of additional tax cuts.
If this growth trajectory continues then the government should be in good shape for an election next year.
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