Those National Accounting Stats

The stimulus was always a matter of making sure the data came out OK rather than actually generating a recovery of any worth. The fantastic negative consequences of the GFC as prognosticated by Treasury turned out to be wildly pessimistic so that, in the end, when unemployment rose from just under four percent to just under six percent it looked better than the forecasts that had existed a few months before. But it should not be forgotten that we did have a recession in every imaginable way except the official way, which required two consecutive quarters of falling GDP. Spending the equivalent of four percent of GDP on a stimulus will have that effect on the numbers even if it was spent on useless nonsense, as much if not most of it was.

So today’s National Accounts needs to be looked at in the context of a wearing off of the stimulus as the economy tries to find its way into a proper recovery. The data that matter are the figures on private sector investment which fell during the quarter by -0.2% in trend terms and rose a meagre 0.8% across the year. Over on the public sector side, however, public sector investment has risen this quarter by 0.3% but across the year went up by 24.2%. The appearance of recovery has occurred because of public spending. That few of us outside the public service actually feel the benefit of a supposedly growing level of output is just the way it is.

To complete the picture, government consumption has risen by 4.0% over the year while for the private sector it has gone up by 3.0%. That buying has outrun production is further reflected in the data on exports and imports, with imports having risen by 13.4% over the year in contrast to the far lesser increase in exports of 5.4%.

Recovery is recovery of the private sector. Even if you think that there is a role for useless public spending in the midst of some economic crisis – a view I do not share – ultimately growth must occur through an upturn in private sector activity. Achieving this kind of outcome is what the government must now attend to if we are not to sink into a sea of debt.

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33 Responses to Those National Accounting Stats

  1. Rodney

    Catallaxians love the boring Austrians and even occasionally the interesting Austrian.
    The never mention the true prophets, Mancur Olsen and C. Northcote Parkinson.

  2. New Gold Dream

    GDP per capita is still about half a percentage point lower than it was two years ago. This government has actually taken us backwards in terms of this measure of living standards. Strong population growth has helped mask what has been a fairly mediocre economic performance.

  3. Dr Johnson

    In Australias case the 2% rise in unemployment can be explained almost entirely by the stimulus package. A few exporting jobs aside, it was the stimulus that lead to greater unemployment.

  4. AndrewL

    Domestic steel orders were close to zero for six months from November 2008. Both major steel companies in Australia would have very likely had to stop their blast furnaces without the stimulus. Once that happens laying off employees occurs and three to four months to start back up.

    What would be the flow on effect if that occurred?

  5. JC

    AndrewL

    They can’t stop running their furnaces. It would have cost one firm that I know of around $250 million to fire it up again as shutting down causes extensive damage.

  6. AndrewL

    Once you fill up your slab yards, where do you put your steel if no one is buying, JC?

    They can stop their furnaces, it happened to many steel mills in the US. AS you point out it costs a lot, lose trained employees and takes a long time to restart. There comes a point where it is necessary if there is no demand.

  7. JC

    AndrewL

    I didn’t say anything about US mills closing down the furnaces as I don’t know what they did. I was simply Telling you the cost of closing one down here. Presumably the US furnaces would have had to go through the expense of firing them up again.

    Listen I’ve had fur losing trades in a row today. You think the government can make me hole is I asked?

    There’s never nay excuse for subsidizing private business. None. IF it cost them 250 smackers to fire up the plants then so be it.

  8. FDB

    “Listen I’ve had fur losing trades in a row today. You think the government can make me hole is I asked?”

    You turkey. Why would the government help you? You’re not making anything or employing anyone, just trying to make a buck out of others’ endeavour.

  9. JC

    Any economic endeavor has value if there’s a positive rate of return. I make a buck overall so I have just as much right to ask for a bailout as AndrewL’s blast furnace, you economic illiterate.

    I can see why you think Greens economic policies make sense, Drummer boy.

  10. JC

    And you know, FDB, for someone playing the bongo drums for a living you have a real nerve adjudicating what other people do for a living. Get back under the rock.

  11. FDB

    Yeah, that was just a cheap shot. Of course I know investors make an economic contribution.

    But when you’re looking at who to help with government money, it makes sense to start with firms employing people and producing stuff, rather than (as has recently happened) giving more money to the gamblers in the hope their luck will turn around.

  12. JC

    We’re all basically gambling in the pursuit of gain. The steel mill has no absolute assurance that a customer will walk in the door tomorrow or more accurately that their overall business plan etc. will make money.

    They gamble as much as I do. In fact I would see my “gamble” as less risky than theirs. At least if I am making losses I can simply press a key and I’m out. Look at what they have to do even if they close down and how much it would cost them.

    Everything is about risk and controlling it. Our life is about risk and controlling it.

    I’m not expecting a bailout by the way…. 🙂 it was to make a sarcastic reference to AndrewL’s selectivity.

  13. rog

    This is just another stupid Catallaxian thread, the entire construction industry knows that it owes its very existence to the federal stimulus.

    But here they like to refer to Austrians long dead.

  14. rog

    There is no comparing productive industries like steel mills and JCs gambling addiction.

  15. Rafe

    And I was just about to ask JC for advice on how to invest the $25 that I won on the pokies last night.

  16. .

    “This is just another stupid Catallaxian thread, the entire construction industry knows that it owes its very existence to the federal stimulus.”

    No rog, you’re being very stupid at the moment. Non-farm GDP has negative growth. You want to thank the stimulus? Okay. The building industry gets propped up at the expense of everyone else.

    Dr Johnson is of course correct, look at the increases hidden unemployment, acceleration of capital expenditure declines and net emigration – because of the stimulus.

  17. AndrewL

    JC, I thought that “can’t” meant can’t. Not that it meant it would cost them a lot.
    I was just pointing out that the stimulus wasn’t just about the data and had real world consequences.
    For all the criticism of the BER it built school facilities of value and stopped the loss of jobs in the steel and construction industries. There were real costs faced both privately and publicly if the stimulus wasn’t implemented. It is hard to measure the cost of things that didn’t occur. The risk of it occurring was very high in June 2009. No one I spoke to in the steel industry had seen a drop in orders as big or long.

  18. .

    “There were real costs faced both privately and publicly if the stimulus wasn’t implemented.”

    Erm okay, what about the other industries which paid an implicit subsidy?

  19. JC

    There is no comparing productive industries like steel mills and JCs gambling addiction.

    Wodge. You failed as a developer for many reasons, but if you can’t visualize property development as risk taking.. gambling… then I don’t know who can help you.

    The point is that no one deserves implicit or explicit subsidies. This is pretty well known in economics but seeing you don’t know any you of course don’t understand.

    AndrewL.

    What a convoluted rant. What is “value” to explain the BER and the rest of spending binge. Show us the evidence and define “value”.

  20. AndrewL

    I am learning new definitions for words. Both rant and can’t – it’s like Dr Seuss.

    Evidence for value would be the buildings at the schools. Value as I understand it is a Relative term – it may mean something different to you. They may not be best value but they are of some value. A lot better value than stopping and starting blast furnaces for both private and public purses.

  21. .

    What a load of crap. Defending cost blowouts of 1000% in the name of protecting jobs.

  22. JC

    Evidence for value would be the buildings at the schools.

    Ignoring the rorting?

    Value as I understand it is a Relative term – it may mean something different to you. They may not be best value but they are of some value.

    So it’s fine to accept second and third rate outcomes, as long as you think there is value… not great value as you seem to admit between the lines but “value” all the same.

    A lot better value than stopping and starting blast furnaces for both private and public purses.

    Personally i don’t give a shit about Bluescope’s blast furnace and how much it would cost to relight it. It they are hard up on cash they tap the shareholder and do a rights issue for the money to reopen it.

    It’s not the government’s job to be subsidizing a blast furnace or a strip-joint with taxpayer money.

  23. JC

    Oops

    ….IF they are hard up…..

  24. AndrewL

    I am not ignoring the rorting. It just doesn’t seem that extensive according to the reports.

    From a societal point of view stopping two blast furnaces and losing three months or more of production doesn’t seem an efficient use of resources. Not to mention ceding markets, both domestic and export, to foreign competitors seems in the national interest.

    I am not convinced we would have been better off letting the steel industry be bought by overseas interests rather than a short term subsidy. Indian steelmakers are concentrating ownership, which may lead to a lack of competition.

    Ther term is strip mill, not strip joint, by the way.

  25. .

    “From a societal point of view stopping two blast furnaces and losing three months or more of production doesn’t seem an efficient use of resources. Not to mention ceding markets, both domestic and export, to foreign competitors seems in the national interest.”

    When was that going to happen? In AUD terms, the low of 2008 was still around 165 AUD per tonne. Please tell m if production costs ever got this high.

  26. If Labor believed that climate change was that “great moral challenge”, then they should have given them $250 million to close the mill, thus reducing CO2 emissions. Won’t any of you think of the planet? Gaia weeps every time a blast furnace starts up. And kittens die in their thousands.

    The fact that they paid for these enormous CO2 spewing monsters to continue operating demonstrates beautifully the gulf between Labor’s words and actions.

  27. AndrewL

    When was that going to happen? In AUD terms, the low of 2008 was still around 165 AUD per tonne. Please tell m if production costs ever got this high.

    The closure would have been due to no demand. Steel is generally not a commodity made and then sold. It is usually made to a customer order and specification. At the time both mills stockpiled and ran their furnaces at a low capacity as possible.

    Prooduction costs did get to the point where they were making steel for more than they could sell it. Coal and Iron ore contracts hadn’t expired so they were still paying boom prices. I think Billiton sued Bluescope for not taking their quota of ore during that period.

    My point wasn’t to cry for the steel industry, but to point out that the stimulus was effective for the industries targeted and wasn’t just about manipulating national account data.

    As for as a boy on a bike. What is the carbon cost of shipping ore and coal to China or India and having it return as steel? Maybe they stimulated for Gaia? And the kittens.

  28. .

    “The closure would have been due to no demand. ”

    Um okay. So the price fell to zero? What about the Chinese stimulus?

    “Steel is generally not a commodity made and then sold. It is usually made to a customer order and specification.”

    Even bog shit like rebar or I beams?

    “Prooduction costs did get to the point where they were making steel for more than they could sell it”

    I’m way off. I was thinking iron ore. Steel (rebar) is more like $1000/tonne (pre crisis). At the end of 2008, what was the net profit/loss per tonne?

    Here’s the thing: Bluescope has been selling to China at a loss for sometime now, for market share. They were doing it before the Olympics as well.

    “My point wasn’t to cry for the steel industry, but to point out that the stimulus was effective for the industries targeted and wasn’t just about manipulating national account data.”

    This is having your cake and eating it too. It benefitted building because it was spent largely on building. Take out the increases in hidden unemployment, increased slowdown of cap ex, implicit subsidies from all other industries and negative non farm GDP we now have. Then it looks good – in isolation, these show it to be a shambles.

  29. JC

    How do you know if they would have closed the plants, AndrewL and since when should the Australian government take taxpayer to ensure furnaces don’t close?

    Why should the taxpayer take the hit rather than the shareholders?

  30. AndrewL

    How do you know if they would have closed the plants, AndrewL and since when should the Australian government take taxpayer to ensure furnaces don’t close?

    I am just saying what management were considering at the time from what people said on the plants. It is obviously something they had to consider, and something plants in other parts of the world did. Bluescope had one blast furnace due for reline, which they brought forward, which was fortuitous. They ran the other furnace at 40% capacity, the next step is stopping. Onesteel were stopping furnace production for days at a time and not using mini-mills.

    I am not saying they would have closed the plants but there was a real risk of them being mothballed.

    What would have been the flow on if they had shut down?

    Why the Government pays would be: the tax they forgo, the social security they shell out, the loss of business confidence, their political cost should unemployment increase.

    I have been to dead steel towns in the US and there is a big social cost to pay. It’ll happen to both Wollongong and Whyalla at some stage like it did to Newcastle, but there is a chance to plan for it by governments without bringing the costs of high unemployment.

  31. JC

    I am not saying they would have closed the plants but there was a real risk of them being mothballed.

    Listen AndrewL , we don’t need a history because it’s not that interesting and secondly it’s basically irrelevant because you’ve already mentioned variations a few times.

    This is a taxpayer problem as against a shareholder problem because……?

  32. .

    “Why the Government pays would be: the tax they forgo, the social security they shell out, the loss of business confidence, their political cost should unemployment increase.”

    This is a doozy since the hidden unemployment – Rudd’s jobs saved = 70 000.

    So we paid 43 bn to lose 70 000 jobs?

  33. boy on a bike

    AndrewL, you have just hit the nail on the head.

    As for as a boy on a bike. What is the carbon cost of shipping ore and coal to China or India and having it return as steel? Maybe they stimulated for Gaia? And the kittens.

    What is the fucking point of using a carbon tax to close down our domestic industries when the carbon cost of importing the products of those industries from China is likely to be higher.

    This sort of stuff only makes sense to Greentards.

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