Today's national accounts tell us what we already knew. The economy continues to grow, but slowly. The good news is that the pace of growth is not slowing. The bad news is that it is not accelerating either.
In the six months to June, the Bureau of Statistics estimates that our GDP grew at an annualised pace of 2.25 per cent. That might be welcome in Japan, where the population is now shrinking, but Australia's population at last count was growing by 1.75 per cent.
Rate cut on the books, unless the dollar keeps falling.Credit: Carla Gottgens
The real bottom line of economic performance is not GDP, but GDP per head. The economy is growing, but that growth is too weak to stop unemployment rising, as firms fight for survival by economising wherever they can.
In the past year, on the trend figures, hours worked in the market sector grew just 0.2 per cent. Wages grew just 2.7 per cent, and profits outside the finance sector grew just 0.8 per cent.
Firms are keeping their heads above water, with some welcome results. Labour productivity in the market sector grew 2.3 per cent, on top of a 2.8 per cent growth the year before. Real unit labour costs declined by 1 per cent, and are now 4 per cent below their pre-GFC peak.
It is a similar story at home. Household spending rose just 2 per cent in the past year. Household saving grew 10 per cent. These are bad times for shops, restaurants and anyone trying to sell us things we don't actually need. But we are seeing households paying down mortgages and storing money in the banks, and that is the sensible thing to do in uncertain times.
These figures won't change what anyone thinks about the economy. At first sight, they don't tell us anything new that is likely to reverberate in the final days of the election campaign.
But they will warn the Reserve Bank that the "green shoots" of recovery it sees are still tiny. While the Reserve officially no longer leans towards another rate cut, this data sends a clear message that another cut must be on the books unless the dollar keeps falling and we see a clear pick-up in the figures for employment, housing and retailing in coming months.
Why? A look at where we are growing helps explain it.
Only a quarter of that growth came from domestic spending. The Bureau estimates that investment peaked late in 2012, and has declined 2.3 per cent in the past six months as the mining boom begins to fade. The main engine driving our growth is now exports, which swelled by 6.4 per cent over the year, while imports declined 1.8 per cent.
By industry, the growth in output was dominated by two industries: mining and finance. Almost a third of the growth over the past year has been in mining, where output grew 8.1 per cent as more mines have passed from construction into production. Another 30 per cent of the growth was in finance and insurance, which grew 7.2 per cent as we saved more and more for it to invest for us.
The health sector is immune from bad economic times, growing 5.5 per cent – and despite all the staff cuts at Federal and state level , the Bureau estimates the output of public administration and safety (including private security firms) grew 5 per cent. You wonder how they measure that.
Other industries with many employees were not doing well. Manufacturing output inched up 0.6 per cent, but remains 10 per cent below its pre-GFC peak. (You sometimes see ignorant commentators say this is normal for manufacturing. No, it isn't; tell them to look at the data.)
Hotels and restaurants went backwards by 1.8 per cent. It's been a particularly hard fall in Melbourne, where 1600 cafes and restaurants have reportedly closed their doors. The Bureau reports that restaurant activity in Victoria has dropped 5 per cent in the past year.
Road transport activity, like manufacturing, is still 10 per cent below its pre-GFC level. Even air travel declined last year by 2.4 per cent, as we cut back on discretionary spending. The volume of retail activity did grew 2.3 per cent, but a lot of that was on the back on discounting that meant stores sold more goods, but made less from them.
By state, the baton of growth has passed from Western Australia to the rugby states. The only states where total spending grew faster than the population over the past year were Queensland (up 2.5 per cent) and New South Wales (up 1.6 per cent). The Bureau estimates that Victoria and South Australia are now edging up slightly, but in the June quarter, spending in Victoria was up just 0.1 per cent over the year, while in SA, it was still down 0.7 per cent.
Western Australia is now in recession, on any sensible definition. In the past three quarters, its private investment has plummeted by 10 per cent, total spending has fallen 3.8 per cent, and in the past year unemployment has climbed from 3.8 per cent to 4.8.
In Tasmania, there is still no light on the horizon. In trend terms, total demand in the state economy has now shrunk for seven quarters in a row. In two years, unemployment has shot up from 5.2 per cent to 8.4 per cent. One poll last month claimed a 15 per cent swing against Labor, which if true would leave it with just one seat in the state.
The Northern Territory is booming with new mining construction; the ACT is stalling with Federal spending cuts. Otherwise Australia's economy divides on rugby/AFL lines. Year on year, spending in the rugby states grew by 2 per cent. Spending in AFL territory slid backwards by 0.8 per cent. Some will blame James Hird for this, others Andrew Demetriou.
In short, the economy is weak, but no weaker than it was three months ago. Australia's world record of 22 years without a recession has been extended. But its economy is growing well below its potential.