Still, the latest reported expansion of our economy, however underwhelming, means that Australia has added yet another quarter to the near-27 year-long run without technical recession, which is defined as consecutive declines in real GDP. No other country in modern times can match this, so we should be happy for that. But, nearly three decades without recession means we carry significant excesses into the next downturn, not least of which is record-high household debt. This baggage risks making the next recession, whenever it comes, unusually painful.
It’s no surprise in this context that we are struggling to generate faster rates of economic growth. Effectively, we have run out of booms, having seen a succession of good fortune drive this extended period of all but uninterrupted growth since the last serious downturn in the early 1990s. Absent another boom - and it’s not clear what the genesis of that will be - the next phase of our growth probably will be sourced from much-harder-won gains in productivity growth. These gains usually stem from sustained reform, which has been largely absent of late.
The main drivers of growth in the economy last quarter were broadly as expected. Household spending was robust, helped along by a surge of spending on the new iPhone. Consumers added 0.6% points to growth in the economy in Q4. Public spending on consumption and investment added another 0.5%points to growth. These healthy gains mean that domestic demand growth was solid at 0.6%q/q. That’s the good news.
The main sources of weakness were a big subtraction from net exports (-0.5% points), a large fall in private business investment (payback after a big rise in Q3), and another dip in dwelling construction. The net exports subtraction came from softness in exports at end-year, and imports (which subtract from GDP because they are outputs of another country) rose for the seventh straight quarter. The business investment outlook has brightened since Q4.
Of the major industries, mining production (up 1.3%q/q) rose strongly as new output in the wake of the investment boom came on stream, and growth in tourism-related spending grew 1.0%. Public output expanded 1.2%q/q. The largest falls were for farming, electricity, gas and water, and transport.
By region, state final demand grew everywhere but in Western Australia and the Northern Territory, both of which are suffering hangovers in the wake of their respective mining investment parties. The Australian Capital Territory grew at the fastest rate (1.6%q/q), followed by Tasmania (1.3%) and New South Wales (1.0%).
The quarterly accounts run to 92 pages of detailed statistics, and included a few nuggets of information. For example, real net disposable national income per capita, the best indicator of national living standards, fell in Q4. This follows a rise in Q3. Also, productivity dipped in Q4, having been unchanged in the previous quarter. The household saving ratio rose a touch to 2.7%, albeit well down on the peak from nine years ago above 10%. There was a healthy rise in employee compensation – that is, wages.