National Accounts: September quarter 2012

The ABS have just released the national accounts:

In seasonally adjusted terms, GDP increased 0.5% in the September quarter, through the year GDP growth was 3.1%.

Ordinarily you’d think that is a good thing, but …

From the September quarter 2011 to September quarter 2012 the Mining (0.8 percentage points) and Health care and social assistance (0.4 percentage points) industries were the largest contributors to total trend growth of 3.4%. Manufacturing detracted 0.2 percentage points in trend terms.

Mining and government spending (Health care and social assistance industries) are driving that growth. So while the government wages war against mining it is their debt and deficit spending propping up GDP growth. Bottom line – that is simply not sustainable.

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43 Responses to National Accounts: September quarter 2012

  1. .

    What does this look like if we take mining out, or reduce to say a 1997 level of activity?

  2. Louis Hissink

    GDP – government doesn’t produce anything, so it’s contribution should never be incorporated into that metric. So what would it look like when only private sector production is used?

  3. Ubique of Perth

    The blowout in Australia’s manufacturing unit labour costs illustrated in a useful graph on Alan Kohler’s website helps explain the sorry state of manufacturing today. Fair Work needs to rebadged as Out of Work.

  4. .

    The left won’t even consider that payroll tax creates disincentives to employ.

  5. Pedro

    That’s silly, of course the govt produces things. The relevant question in that respect is whether those things will be produced more efficiently by private enterprise. Further, it is inevitable that govt will increase as the population ages. There is no conceiveable political settlement in which looking after old people will be privately funded.

    What is relevant is the point Sinclair makes about how govt production is being funded and how that skews our perceptions of the economy. If private sector productivity does not improve then the govt drag on the private sector will be a lot worse. Given that we can’t avoid an increase in levels of redistribution we have a desperate need to grow the whole non-govt pie.

  6. .

    I keep on about it, but Pedro, any Government that wants to do that ought to look at the efficacy and efficiency of regulation, particularly onerous occupational licensing.

    Doctors
    Lawyers
    Bank managers
    Sparkies
    Plumbers
    Engineers
    Pharmacists
    Mechanics

    Any occupational licensing above this is simply featherbedding (insurance on the open market should sort it out anyway).

    You do not really need training to be a teller, and even when you read out the PDS on a credit card, it is a charade, no one listens.

    Occupational licensing and the AQF is rotting the economy from the inside out, whilst the ALP is treating it as an accomplishment in the form of “creating a skilled workforce” and wonders why we have a “skilled labour shortage” when the indigent cannot pay to do a course on OH&S so they can get a job as a bloody lawn mower.

  7. brc

    @louis – of course, you’re correct, ultimately the majority of government spending produces nothing (health, roads and education are exceptions) But take out GDP manipulation by government borrow-and-spend and Keynesian economics is dead.

    The only reason Australia has thus far avoided recession is by borrowing future growth and wasting it now. It’s like staving off bankruptcy by borrowing against your future earnings, but with no asset backing them. If a company did it, they would rightly be shut down (and directors would face legal action). But in the government, it’s considered sound policy. Go figure.

    You cannot continue to grow an econonmy by increasing the amount of welfare.

  8. brc

    @louis – of course, you’re correct, ultimately the majority of government spending produces nothing (health, roads and education are exceptions) But take out GDP manipulation by government borrow-and-spend and Keynesian economics is dead.

    The only reason Australia has thus far avoided recession is by borrowing future growth and wasting it now. It’s like staving off bankruptcy by borrowing against your future earnings, but with no asset backing them. If a company did it, they would rightly be shut down (and directors would face legal action). But in the government, it’s considered sound policy. Go figure.

    You cannot continue to grow an econonmy by increasing the amount of welfare.

  9. Pedro

    Sinclair, its a very happy report, not!

    “The Terms of trade fell 4.0% in seasonally adjusted terms in the September quarter following a 0.8% decrease in the June quarter.”

    “During the September quarter, seasonally adjusted Real net national disposable income decreased 0.7%. Growth over the past 4 quarters was -0.2% compared with 3.1% for GDP.”

    “In the September quarter 2012, … the trend Non-farm Real ULC increased 0.7%.”

  10. Pedro

    How to self-identify as a dill:

    “@louis – of course, you’re correct, ultimately the majority of government spending produces nothing (health, roads and education are exceptions)”

  11. .

    Pedro

    They are funded from elsewhere, and they are not pure public goods.

    At best it has a neutral net effect on output.

    More to the point, it would be better off if they simply redistributed the funds.

  12. Pingback: government spending more … outcome, worse | pindanpost

  13. Rabz

    Bottom line – that is simply not sustainable.

    The entire labor kakistocracy is unsustainable.

    There’s not a single government jurisdiction in this country they haven’t completely rooted.

    Enough.

  14. brc

    How to self-identify as a shill:

    > pretending that the government really creates things.

    Name one thing that the entire dept of climate change has created. One Thing.

    Yet all their dipshittery is counted as GDP.

  15. Gab

    Name one thing the Department of Social Inclusion has created.

  16. Rabz

    Name one thing the frigging yuman rites commissariat has created.

  17. Pedro

    brc, those “little” exceptions are still big.

  18. Pedro

    It’s wrong to apply your subjective values to govt output. The DCC makes some idiots feel good about AGW. The human rights commission provides servies that some people value.

    Just because we don’t like them doesn’t mean they are not valued by others. Making things will only get more capital intensive so obviously more and more people will be engaged in services.

    The problem with govt services is not that it doesn’t make things, it is that the things it makes are not subject to market disciplines so the prices and quantities are fucked.

    You’d think people regularly reading an economics blog would understand this stuff.

  19. .

    Pedro

    We can measure that by measuring public sector productivity. Except that it isn’t measured.

  20. Skuter

    Pedro, what about the enforcement of pointless regulation/red tape/green tape, etc.? That has a negative value. Also, what about private sector activity that is wasted on compliance, say like miners complying with MRRT reporting requirements despite not having any obligations? Or perhaps the rubbish paperwork that is generated as a result of equal opportunity for women in the workplace reporting requirements. I think these things would go a long way to offsetting any value created by the government and could even turn it negative. Yet it all adds to GDP…

  21. Rabz

    The problem with govt services is not that it doesn’t make things, it is that the things it makes are not subject to market disciplines so the prices and quantities are fucked.

    You’d think people regularly reading an economics blog would understand this stuff.

    What a bizarre combination of sentences.

    HRC’s don’t ‘make’ anything except apallingly bad quasi-judicial precedents that create infinitely more harm than good.

    That is, not “the prices and quantities are fucked”, but the outcomes.

  22. The Australian has come up with a new concept in its report on the National Accounts.
    It’s about as creative as most of what else appears in Murdoch’s Pravda.

  23. Pedro

    Even the wildest Rothbardian nutbag thinks that the anarchic society will evolve ways of resolving disputes between people and that will be a service people will pay for. (ditto for security and fire-fighting and so on.) The HRC is no different just because you and I think it sucks.

    Skuter, you are now mistaking efficiency arguments for the question of whether anything is produced. I’m sure Holden employs lots of people who don’t actually produce cars but are required to ensure that the company pays and is paid the amounts it owes.

    Numbers you’re correct, just read this nonsense:

    “Treasurer Wayne Swan said the GDP figures showed the ongoing resilience of the Australian economy in the face of a difficult and volatile global environment. While conditions remained patchy in some parts of the economy, growth in the quarter was reasonably broad-based, he said in a statement.

    Growth was underpinned by strong business investment, modest household consumption, a lift in exports and an accumulation of inventories, the Treasurer said, adding: “There were also encouraging early signs of an improvement in housing investment”.

  24. NoFixedAddress

    Sinclair,

    government spending (Health care and social assistance industries) are driving that growth.

    Read this and weep.

    I checked the funding section and it is fully occupied!

  25. Skuter

    No Pedro, I’m not making efficiency arguments. What I’m saying is that governments divert resources into unproductive activities or even value destroying activities.
    Allow me to elaborate. Firms combine inputs to produce outputs that can, in a broad sense, be used to meet three goals. One is satisfying consumer needs today (production of consumer goods/services). The second is increasing capacity to satisfy consumer needs in the future (investment in capital goods/services). These two goals ate largely determined by the exercise of free will in markets. The third goal is satisfying the requirements of politicians and bureaucrats. This goal is largely a product of coercion and can end up reducing the ability of forms to meet the first two goals.

  26. stackja

    As long as it is ‘sustainable’ until the election. ALP does not care.

  27. Pedro

    No need to elaborate, I understood you in the first place. My argument is simple. Contra L Hissink, Govt does produce goods and services. The fact that it does so inefficiently and is a drag on other parts of the economy is irrelevant to that simple point.

    As the anarchy analogy shows, even regulation can be regarded as a service or good that meets a need or is desired. You and I might think a lot of it pointless or stupid, but other people will disagree and, for example, place great value on green-tape or the FWA. How is that any different from the production of home and away episodes, or coldplay cds, which no discerning person could value at all?

    I made the point in the first place because stupid knee-jerk statements make the libertarian case look dumb by association. Lots of lefties are scathing of this blog and the stupid comments give them grounds. Just because lefties are unthinking sloganeers doesn’t mean we should be too.

    And how is this not an efficiency argument:

    “What I’m saying is that governments divert resources into unproductive activities or even value destroying activities”

  28. Skuter

    That an anarchistic society will develop institutions to deal with ‘market failures’ is not proof that regulations lead to the production of anything of value.

    As the anarchy analogy shows, even regulation can be regarded as a service or good that meets a need or is desired.

    But the amount produced and the value of it is not determined as a result of free exchange. It is the result of coercion.

    If politicians or bureaucrats intervene through coercive means, are they not effectively saying that individual valuations are somehow ‘wrong’? The difference between a home and away episode and equal opportunity reporting is that no-one is forced to watch a home and away episode, yet some people do and advertisers pay to spruik their wares at times when it is on. Even then, home and away is probably produced as the result of local content requirements or some such bullcarp…

  29. .

    Pedro

    What choice do they give us? The APS & ALP/Green aliiance staunchly refuses to let public sector productivity to be measured.

    It is prudent to assume they are wastrels.

  30. Skuter

    The key point Pedro, is that for National Accounts purposes, the activity that results from government enters at cost – it is not valued correctly at all. Some like to argue that production of pollution or hospital services as a result of car crashes are valued positively in GDP statistics, yet actually detract from societal well being. The crux of my argument is that a lot of government activity can be thought of like pollution or treating victims of car crashes – bad for society, or a negative externality, if you will.

  31. Pedro

    Mark, sure, I don’t think it’s an assumption. You can measure plenty of waste just by looking at where they do compete, state primary schools v systemic schools for instance. I don’t think it is a conspiracy though, in the absense of market prices anybody is just guessing.

    skuter, are you world point-missing champion or something? yes, it’s all waste and shite, but that’s not the point. The first claim was that govt produces nothing. The second claim was this doozy:

    “@louis – of course, you’re correct, ultimately the majority of government spending produces nothing (health, roads and education are exceptions)”
    [which leaves one thinking that brc is struggling with basic logic]

  32. Skuter

    Pedro, it is you who is missing the point entirely. By your logic, if the government spent $1 billion per year on breeding llamas and trucking their crap to your front yard and piling it up, the government is ‘producing something’? Well, I suppose in a physical sense that is true. However, the key point that I, Louis and others are trying to make is that in terms of societal well being, the amount of ‘stuff’ that is produced is not the relevant metric, but how much of that stuff satisfies consumers (either now or in the future) who are willing to voluntarily exchange their own resources for that. The key characteristic of government output is that it is the result of coercion, not voluntary exchange…

  33. brc

    [which leaves one thinking that brc is struggling with basic logic]

    Pedro, if you think I’m struggling with basic logic, then you’re coming across as an a-hole. I’ve been around here on and off for a while, and it should be clear that while my opinions may differ from others, I don’t have a logic or understanding problem.

    It’s already been pointed out to you several times why GDP is a bad measure, and why the government produces nothing.

    I’ll let you come back with a good counter argument and critique. Or you can start calling people names and calling them dumb and short on logic. Your choice on how you’ll be treated in the future, from me at least.

    The government produces nothing except for the aforementioned services. If GDP might very well include all the government paper-fighting, but the conclusion from that is that GDP is a waste of time, which I have argued many times.

  34. Poor Old Rafe

    Certainly GDP is a blunt indicator, it just happens to fit perfectly with Keynesian thinking.

    Taking Pedro’s point seriously, the question is how much government stuff is the kind of thing that is needed for good governance (police, courts etc), for whatever we regard as essential public services and how much is produced that people would be prepared to buy (education, health). And the next question is how efficiently these things are produced.

    And then the question of red and green tape, on a point by point basis we need to know what is necessary and effective and what is just bloodyminded interference and empire building by regulators.

  35. Pedro

    “By your logic, if the government spent $1 billion per year on breeding llamas and trucking their crap to your front yard and piling it up, the government is ‘producing something’? Well, I suppose in a physical sense that is true.”

    Skuter, exactly. The rest of your comment is a different issue and it’s kind of you to put sensible words in Hissink’s mouth, but that’s not what he said.

    brc, nobody minds calling me a fuckwit or whatever, so perhaps I’m an a-hole too. But lets go back to the claim. It’s silly on its face to say govt doesn’t produce much except for all this stuff. Even writing that list should have got you thinking about defence, justice, water, sewerage, ports, air traffice and so much other useful stuff. The govt produces lots of things its just that you don’t like most of them. But hey, value is subjective.

    What’s really silly is that we’re not even disagreeing about anything important. I’m pretty sure you me and skuter are all small-govt types. I’m just arguing about making silly knee-jerk claims like “the govt doesn’t produce anything” or “the govt doesnt produce much, not counting a whole bunch of stuff that is oviously stuff and is a big part of gdp”.

    I’ll give you another example, do you think that the expediture flowing through a private charity should be counted in GDP? If you do, then how do you distinguish that from transfer payment

  36. Pedro

    PS, I never said that GDP was a good measure.

  37. Anne

    Even writing that list should have got you thinking about defence, justice, water, sewerage, ports, air traffice and so much other useful stuff

    Pedro, aren’t these the things that people can’t do for themselves so we ‘pay’ Government to do it for us.

  38. Entropy

    I suspect a lot of furious agreement here. Needs more beer.

  39. John Comnenus

    Unfortunately the slowdown will be blamed on governments attempting to live within their means rather than being seen as the hangover from a debt fueled government spending bender that sculled the Mining boom and threw up a slowing economy as a result.

  40. Pedro

    Yes Anne but they’re still production, which is the only point. Entropy nails it.

  41. Louis Hissink

    Pedro,

    So what did I say?

    I said government doesn’t produce anything, the implication being that it doesn’t produce stuff that can be purchased in the market place, generally speaking. Is government into food production? Farming, Mining? Manufacturing? House building? Etc etc. These are productive activities that produce stuff that people buy. Entrepreneurs create new stuff because they see a need for something.

    What does government create to satisfy a consumer’s need? Nothing. That’s why government activity should not be counted in GDP, and if it is, it should be a negative quantity, to show that all government activity is at the cost of the private sector.

    People produce stuff primarily in order to buy food to stay alive. Government is the fellow who produces nothing, and in order to eat has to then either counterfeit money, or steal it. Either way, government participation decreases productivity.

    And of course my question remains unanswered – if we omit the government contribution to GDP, what will that show, year on etc.

  42. Skuter

    Pedro, my claim is that while government might produce some useful things or services, they typically destroy a lot of activity that would add value through wasting resources (both directly and indirectly) on producing things that are not valuable (certainly not as valuable as the time and resources that went into it), that is, the opportunity cost of waste. But I go further. There is activity that could be valuable that never happens in the first place because the government bans it or otherwise scares people out of producing. There are exchanges that could voluntarily take place but don’t because of government.
    So, in a nutshell my argument is that the net value of government to society is either zero or negative. It is in that sense that I agree with Louis. If he meant something else, well then I don’t necessarily agree.

  43. Pedro

    “GDP – government doesn’t produce anything”

    “So what did I say?

    I said government doesn’t produce anything, the implication being that it doesn’t produce stuff that can be purchased in the market place”

    Humpty Dumpty strikes again.

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