Lies, damned lies and the National Accounts

We close down much of the economy for more than a year and this is where we supposedly now find ourselves: Economy back in record recovery. And looks who the star of the recovery has been.

Australia’s economy is larger than before Covid-19 triggered the worst recession in a century, with GDP lifting by 1.8 per cent over the first three months of the year to confirm the most rapid recovery from a downturn in peacetime history.

National accounts figures from the Australian Bureau of Statistics show quarterly economic activity reached $501 billion in real GDP terms, 0.8 per cent above the pre-pandemic peak of $497 billion in the December quarter of 2019.

The economy grew by 1.1 per cent over the year.

Victoria was the best performing state, with its final demand jumping 2.3 per cent in the quarter as the momentum from its delayed reopening late last year carried into early 2021.

If you would like something a bit more realistic so far as the economy is concerned, there is this chart below on seasonally adjusted growth in wages between September 1998 and March 2021. A very dismal story and these have not even been adjusted for movements in the price level.

The National Accounts are an absurdist Keynesian form of misleading indicator that never tells you what you really want to know, unless you know where to look and how to interpret what you read. Despite what that GDP stats might say, living standards are falling and are only going to get worse, assuming they ever get better again.

For more on just how much of a junk science Keynesian economics is, I invite you to have a look at THE GEEK IN PICTURES: KEYNESIAN CRIME WAVE EDITION from Steve Hayward at Powerline. I will only take in one of his graphs which is this: The Number of Democrats relative to Republicans for Each Academic Discipline. Even economics has 5.5 Dems for every Republican – a left-right balance of 5.5:1 – which is why Keynesian economics remains the standard issue nonsense that it is.

LET ME ADD: I probably shouldn’t buy into this since it will be misunderstood at every level but the question of my interest in rising real wages was mentioned in the comments. As it happens, I used to write the employer economic submissions to the National Wage Case from 1980 through until 2004 and even presented the employer submission from 2002 to 2004. And if you will note, during my time within the system, wages continued to rise, which was, in fact, the aim of every one of us who were party to wage fixation in those days. Real wage increases without inflation was the gold standard which was the outcome we all sought.

Alas, it has always been a mantra on the Coalition side of the fence that wages should be left to the market with no institutional interference of any kind, the sort of system that exists absolutely nowhere in any place on earth. In fact, Australia had, and may still have, the best wage fixing system in the world which is based on ensuring money wage growth is kept within the limits permitted by the growth in productivity. Of course, Labor has even less of an understanding of these issues, but was saved time and again by decisions of the centralised system which made the effort to encourage money wage restraint but higher output per hour worked.

It is a bad business that this ethos has disappeared from our wage system along with the outcomes which were not so long ago absolutely routine. There are probably  a host of reasons but I have been away from it for too long to know what they are. But if anyone believes that higher government spending and an enlarged public service are part of the answer, they could not be more wrong. That is a large part of what has gone wrong with very little indication, given the deficits that are now being routinely run, that anyone will anytime soon figure out what needs to change, or will be able to put those changes into effect.

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26 Responses to Lies, damned lies and the National Accounts

  1. MatrixTransform says:

    Isn’t communications what they now call journalism?
    or is it marketing?

    whatever.

    divide by zero

    to the stars

  2. m0nty says:

    Oh, NOW you care about wages. And what would you prescribe to lift them Prof Kate’s, that isn’t part of your One Answer For Everything, which is to let Mises run the show?

  3. Squirrel says:

    Yep – our economy is a Ponzi scheme juiced by huge debt and asset sales, and Victoria is Ponzi central.

  4. stackja says:

    If Keynes is the solution.
    Why is there still a problem?

  5. Rex Anger says:

    Oh, NOW you care about wages

    Did you ever, m0ntard?

  6. Tel says:

    Australia’s economy is larger than before Covid-19 triggered the worst recession in a century, with GDP lifting by 1.8 per cent over the first three months of the year to confirm the most rapid recovery from a downturn in peacetime history.

    Goose the stats by ignoring inflation … works for a while until prices catch up and the do blame dose wascally capitawists for reacting to the money printing by bidding for goods.

    Oldest trick in the book, not so many people still fall for it.

  7. Bruce of Newcastle says:

    The skew wouldn’t matter much if the majority was correct, but in almost everything they are wrong. Keynesianism, global warming, woke diversity, BLM violence, Marxist socialism and totalitarian thought control. None of these work in the real world, yet they are the mandatory doctrine all these lefty academics must believe. It’s weird.

  8. Chris M says:

    It’s a very distorted economy at the moment. Mining and domestic construction flat out, commercial construction flat line.

  9. Joanna Smythe says:

    What is a surprise when speaking to liberals or conservatives, is the number of people who still think Google is a reliable, go to, search engine. Google are part of the deep, deep, swamp and they now tell you only what they want you to know. It is heavily censored. The biggest worry is students researching anything other than cooking recipes and how to fix a puncture on a bike, will automatically be given the left wing version of events. Why would they bother listening to teachers when they can be indoctrinated via Google.

  10. Anonandon says:

    Pathetic, duck duck go.

  11. Dot says:

    Victoria was the best performing state, with its final demand jumping 2.3 per cent in the quarter as the momentum from its delayed reopening late last year carried into early 2021.

    Like Spergin’ Moleface, this is why I left the profession.

    I was very good (seriously), but I was swamped by airheads, shills and yes men.

    No one without an utterly cynical partisanship, wide eyed gullibility or hardcore drug and alcohol abuse believes that Victoria is going gangbusters.

  12. Bad Samaritan says:

    Hmmmm….and inflation?

    As was /is pointed out by the few very cluey Cat posters daring to stand firm against the hysteria of “it’s Weimar all over again” when a little extra lubrication’s injected into the economic machine, serious inflation needs demand to outstrip supply dramatically. before it actually appears.

    Rather difficult when wages are in decline, eh what? And when we also do not know anything about buying power, what conclusions can we draw?

  13. Mark A says:

    Bad Samaritan says:
    June 4, 2021 at 5:02 am

    Hmmmm….and inflation?

    As was /is pointed out by the few very cluey Cat posters daring to stand firm against the hysteria of “it’s Weimar all over again” when a little extra lubrication’s injected into the economic machine, serious inflation needs demand to outstrip supply dramatically. before it actually appears.

    Desclaimer
    Don’t claim any knowledge economic wise except what closely relates to my work.

    Plenty of demand outstripping supply in certain areas at the moment.
    Here in the EU timber and steel in particular increased by up to 40% and in some cases more.

    Reading some of the comments here, similar price hikes are happening in OZ,
    Whether this will cause an overall inflation or just on specific products I do not know, but I’m happy we stipulated prices to price-index in all contracts.

    Could happen that high prices on these items will reduce demand, or will affect all other prices?

  14. John Bayley says:

    Bad Samaritan, the problem with ‘inflation’ – that is, in its classical definition, monetary one – is not solely limited to ‘increasing general price level’ (CPI).

    As I have pointed out on numerous occasions here, CPI should be renamed the BS index (the ‘BS’ used in the ‘classical’ sense). It is even less useful than GDP.

    Monetary inflation may not increase the prices of goods that the CPI measures, especially when such methods as ‘hedonic adjustments’ are used. This is so even if we accept that such a beast as ‘general price level’ exists and CAN be measured (hint: it does not and it can’t).

    However MI always DOES distort the lines of production/consumption and leads to misallocation of resources that in a hard money system could not happen.

    To that effect, it will ALWAYS work as a redistribution vehicle, mostly from the have-nots to the haves (wage earners to asset holders). We have been seeing that in spades.

    In the long run, it will also ALWAYS lead to the relative impoverishment of the majority of the population. The main instalment of this effect is no doubt yet to come, although nobody can tell exactly when.

  15. flyingduk says:

    Money is generally accepted to have several key functions: it needs to be a unit of account, a medium of exchange, a store of value etc ….

    The ‘unit of account’ bit means you can measure value with it, eg this car has a value of $8000, an hour of my work has a value of $150 etc.

    The problem with inflatable fiat currencies is that the size of that measurement unit changes over time (its value falls due to inflationary increases in supply). No other measurement unit works if its size is not fixed over time, and money doesn’t either. Imagine constructing a building over a couple of years where the length of the m decreased over time – you would get to the end of the project and find that things didnt fit together, that errors had been introduced. The building wouldnt work.

    The present ‘rebound’ in the economy is an example of this – it isn’t real, it is an artefact of the declining value of the dollar, not an improvement in the economy. It doesnt work.

  16. gardez bien says:

    If your definition of GDP is made up of 4 ‘elements’, the GDP so-called can rise even of two of the elements decline. X-M is doing well, thank goodness. But C is way down especially for comparison shopping, hospitality, tourism, airlines etc. I is down too if we are measuring ROI, profitability and wages.

    G is way up, off the scale. This by and of itself raises GDP, Except of course it’s not real growth, and it is all borrowed and ‘printed’ money.

    So the ‘growth’ is illusory, pure sophistry.

    Then there’s unemployment. In Australia you are classified as employed if you work one hour a week. Count them Jim, one. This too is nonsense. So what is the real level of unemployment and underemployment? 20%?

    Lastly, one is concerned a bit about price rises caused by supply chain problems. But these should self-correct. The real inflation, as pointed out by Cats here, is monetary, printing to borrow to spend. Like Weimar, like Argentina , like Hungary, like Zimbabwe, like Venezuela, or like the 1970s.

    I’m not optimistic.

  17. Cynic of A says:

    Correct me if I’m wrong, as I likely will, be, but the National Accounts seem to me to be this:
    A travelling salesman stayed overnight at a hotel in a country town. Ten Bucks.
    The hotelier paid the grocer’s bill. Ten Bucks.
    The grocer payed the butcher’s bill. Ten Bucks.
    The butcher paid the local entertainment girl for her service last week. Ten Bucks.
    The local girl paid the chemist’s bill. Ten Bucks.
    Now, according to the National Accounts, the town was in debt to the tune of Forty Bucks. You would think Ten Bucks, but you ain’t an accountant.
    After the salesman left, the town was out of debt, and the National Accounts showed a fiscal activity of Forty Bucks. You would again think Ten Bucks, but you ain’t the Government.

  18. Ragu says:

    So the ‘growth’ is illusory, pure sophistry.

    That’s for that

  19. V says:

    Mark A: Price rises are happening here for sure.
    Our reno is almost complete and the builder said if he was to quote now the price would be 20% higher than he quoted before the job started 6 months ago.

    Metal roofing has increased by 12% in the last few months, windows have gone up due to lack of glass supply.
    Framing timber is so expensive it is now viable to operate a mill here rather than shipping the logs to china for milling.

    It’s starting to hit and it’s only going to get worse.

  20. Tel says:

    Correct me if I’m wrong, as I likely will, be, but the National Accounts seem to me to be this:

    They count it towards GDP at the moment it has been invoiced … the question of late payment does not concern the government accountants.

  21. Mark A says:

    V says:
    June 4, 2021 at 8:17 am

    It’s starting to hit and it’s only going to get worse.

    Happy for you that you are in the winning straight.
    Glass you say?
    I do remember when we actually made some.
    Think of what you will about Arky, but in many ways he is right.
    We shouldn’t simply abandon manufacturing capacity for an uncertain short term benefit.

  22. Chris M says:

    serious inflation needs demand to outstrip supply dramatically. before it actually appears.

    In the private sector yes I believe this is correct. But the inflation we are seeing is almost entirely government initiated inflation (fees, taxes, services, compliance costs etc) which does not relate to supply and demand – they jack up the supply price, you are demanded / compelled to accept.

  23. mundi says:

    Engineering is the only discipline where you actually have to produce a real live working output system/product.

    Notice the further your down the list as you go more left, the further the subjects are completely disconnected to the provisional of any actual product/system/output that is used by people to actually improve their day to day lives.

    It is only at the pointy end – engineers making systems – chemists making materials for engineers, and economists making a trade system for engineering and chemists, that any right wing presence exists anymore.

    The rest of it is so strongly left – because it thrives on systems where outcomes don’t matter.

  24. mundi says:

    What everyone is missing is whole is the creditor for government debt.

    Most government debt is held by super annuation. The laws steer them to buy a certain amount of government bonds to be ‘responsbile’ and ‘balanced’ etc.

    My (soon to leave it) super fund has shifted to 35% government bonds, which are all paying near 0%. It is amazing that most people will happily accept 1/3 of their savings generating nothing and being eaten away by inflation.

    And this is the real trick of the Australian economic. Wages flat line – while savings is slowly eaten away – which is what really pays for the debt.

    The best thing that could happen to this country is a return to 8%+ interest rates. Suddenly the insane sending on houses will stop, and people in credit will actually get return on their capital and delayed gratification. Right now in Australia if you hold money – you are a sucker.

  25. V says:

    Mundi: The problem with a return to 8% interest rates is that everyone went all in on cheap debt so an increase to real interest rates will destroy the country. Remember the news before the GFC when every increase of 0.25% by the RBA was reported as having an increase of tens of thousands of dollars to the average home loan per year?

    No one in power wants to make that call and most of them are loaded up with debt too so are happy to kick the can down the road.

  26. max says:

    GDP “produced” in the Soviet Union is no different than GDP “produced” by any government — the difference is but one of scale.

    GDP is Designed to Advance the Keynesian Agenda

    If you do not include government spending in GDP, the economy will appear to be shrinking in the middle of a war or in a recession, even though the government is spending money hand over fist. From the point of view of politicians who wanted the government to spend more on goods and services (and yes, war), including government spending in GDP made total sense, because you want to be able to tell the citizens the economy is growing. Politicians have been spinning data and news for ages. Whether we’re talking about the results of reading sheep entrails or of dicing modern economic data, the information is spun to make the politicians look good. The controversial decision to include government spending in GDP was a political move made by President Roosevelt and the Democrats, who were in charge during the Great Depression.

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