The economy is not roaring back

Last week the National Accounts data came out.

To be fair it wasn’t all a bad news story – but it isn’t quite the good news story it has been talked up to be.

Yes – we are bigger than we were some 18 months ago. But … so what?

It is not enough to get back to where you were – we need to recover what we have lost.

So I downloaded some data from the ABS and simply extrapolated the the data from December 2019 to the present to get a guesstimate of where we could/would have been and then compared that to where we are.

So looking first at GDP – yes we are back to slightly above December 2019 levels, but …

The ‘lost GDP’ is $105 billion (and counting).

Then looking at Household Expenditure.

The ‘lost household expenditure’ is $106 billion (and counting).

Things could be worse – but we shouldn’t pretend that we’re out of the woods.

Update: GDP per capita.

Lost GDP per capita is $3766.

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44 Responses to The economy is not roaring back

  1. Mango Man says:

    Aside from the obvious effects of border closure, the loss of migration is a drag on GDP growth. As it won’t be back for a while, that part has to be deducted from trend.

  2. John A says:

    So the loss of GDP is about equal to the loss of Household Expenditure?

    Do our governments collectively then crow about “saving the economy” by infrastructure investment replacing the losses in business investment etc.?

  3. Struth says:

    GDP includes government spending. A completely stupid and irrelevant socialist measure.

  4. Simple Simon says:

    Might I suggest that for more impact and to counter to propaganda around this issue you should put together three articles for, say, the Spectator, the Australian, and the Austrlian Financial Review, and try to mobilise some contacts to get on Sky, say the Bolt Report or Outsiders.

    Presenting the information here is greatly appreciated, but it needs to be leveraged to have a chance of entering the general discourse. This sort of information needs a wider audience.

    Please do it.

  5. Sinclair Davidson says:

    Please do it.

    I have an op-ed with one of the major dailies already. They are sitting on it.

    you should put together three articles for, say, the Spectator, the Australian, and the Australian Financial Review

    It is considered unethical to submit a substantially similar piece to more than one outlet at a time.

  6. Dot says:

    Real GDP per capita growth, please.

  7. Anonandon says:

    In the middle of last year, locked down in Melbourne, surviving on the kindness of strangers (thanks fellow tax payers) I picked September 2021 as the months for when things start to go pear shaped.

  8. Maurice says:

    Actually this is great news. It shows our GDP can rise without the Ponzy Scheme of immigration!

  9. Texas Jack says:

    Just need to increase net migration to a couple of million in the second half and she’ll be right mate.

  10. Damon says:

    I do not think it is possible to randomly shut down businesses for days or weeks without having some adverse effect on the economy.

  11. MPH says:

    Isn’t it great that debt doesn’t matter!

  12. Stu says:

    Are you off by a factor of 10 at the end there – lost GDP per capita?

  13. Ƶĩppʯ (ȊꞪꞨV) says:

    Chinese exceptionalism smashed the world economy.

  14. rickw says:

    Aside from the obvious effects of border closure, the loss of migration is a drag on GDP growth. As it won’t be back for a while, that part has to be deducted from trend.

    Real GDP growth is from the application of technology and movement of resources to more profitable areas. What you’re talking about is GDP transfer. Taking the productivity of a goat herder and moving it to Australia.

  15. Simple Simon says:

    Sinclair Davidson says:
    June 7, 2021 at 2:16 pm

    It is considered unethical to submit a substantially similar piece to more than one outlet at a time.

    I am aware of that. I was thinking along the lines of sufficiently differentiated articles oriented to the different demographics served by those publications.

    Still, I hope that your op-ed gets out soon.

  16. Russell says:

    And where exactly do all those advanced-purchase toilet rolls that we are still holding fit into these numbers?
    You do know that we have huge hoarded assets that have not likely been accounted for.

  17. Baa Humbug says:

    Stu says:
    June 7, 2021 at 3:09 pm

    Are you off by a factor of 10 at the end there – lost GDP per capita?

    That’s also my question.
    Hey Prof, please look into it.

  18. Sinclair Davidson says:

    Are you off by a factor of 10 at the end there – lost GDP per capita?

    That GDP per capita per person. So if I multiply through by the 26 million people we have in Australia that works out to just under $98 billion. Ball park with my other numbers.

  19. Boambee John says:

    Fruit Bat Meal Man

    the loss of migration is a drag on GDP growth

    But an improver of job prospects for the less skilled, and of per capita GDP.

  20. Baa Humbug says:

    Hey Prof.
    Eyeballing that last graph, the red actual line is on 19,500 and the blue forecast line is on about 19,700, a diff of just 200.

    OK I think I got it now. The “loss” is represented by the area between the two lines, not the current linear diff.

  21. Stu says:

    Yep got it. Thanks Sinc.

  22. Boambee John says:

    Sinclair Davidson says:
    June 7, 2021 at 2:16 pm
    Please do it.

    I have an op-ed with one of the major dailies already. They are sitting on it.

    They (unusually) don’t wish to contradict a Coalition government “narrative”?

  23. Dot says:

    Lost GDP per capita is $3766.

    That’s a massive whack.

  24. Sinclair Davidson says:

    OK I think I got it now. The “loss” is represented by the area between the two lines, not the current linear diff.

    Yes.

  25. Pyrmonter says:

    ‘Lost’, in what sense? Compared to a better ‘eliminate and quarantine at the border’ strategy? To a ‘let it rip’ approach? If the latter, factoring in private avoidance behaviour might have left GDP/person lower still: the most widely accepted data series suggest population mortality can reach at least 0.3% in middle sized, middle income economies. Surely if it had, economic performance would have been worse?

  26. Sinclair Davidson says:

    The counterfactual I’m calculating is “Covid never happened”. The alternative inherent in your comment is that we have to accept that we’ll be permanently poorer as a result of Covid.

  27. Dot says:

    Pyrmonter says:
    June 7, 2021 at 6:01 pm
    ‘Lost’, in what sense? Compared to a better ‘eliminate and quarantine at the border’ strategy? To a ‘let it rip’ approach? If the latter, factoring in private avoidance behaviour might have left GDP/person lower still: the most widely accepted data series suggest population mortality can reach at least 0.3% in middle sized, middle income economies. Surely if it had, economic performance would have been worse?

    I will assume that you don’t understand what COVID actually is.

    Over 30 Coronaviruses cause the common cold (out of about 100+ viruses in total). Yes, thousands of people die each year from complications of the common cold, flu and similar diseases.

    Houseflies carry another kind of coronavirus (N95, IIRC).

    We blew up the economy for absolutely nothing; not to mention permanently risking our hitherto remaining civil liberties.

  28. Tel says:

    The counterfactual I’m calculating is “Covid never happened”. The alternative inherent in your comment is that we have to accept that we’ll be permanently poorer as a result of Covid.

    One would think that if the Keynesian stimulus theory was right, then any disaster would leave us better off. They claim WWII ended the Great Depression, don’t they? Larry Summers claimed that the tsunami that hit Japan in 2011 was a boost to their economy.

    https://www.independent.org/news/article.asp?id=3015

    Common sense departed this train some time ago.

  29. Chris M says:

    I will assume that you don’t understand what COVID actually is.

    Here we go

    Over 30 Coronaviruses cause the common cold

    Really, not the 6 – 8 known to infect humans? But perhaps you work at the Wuhan institute 😉

  30. Dot says:

    Really, not the 6 – 8 known to infect humans?

    Okay, then 6 – 8 out of 100+ viruses.

    It’s a nothing burger and always has been.

    The projections were woefully incompetent and the horror stories were from recycled news stories about dead refugees or retracted papers – or fake doctors on Twitter or Tik Tok.

  31. egg_ says:

    Pusmonitor clasping at strawmen.
    Sad.

  32. egg_ says:

    Here we go

    Cops mowing down sunbathers at Bondi beach?

  33. egg_ says:

    We blew up the economy for absolutely nothing; not to mention permanently risking our hitherto remaining civil liberties

    Dr Kate Ahmad should be strung up like Mussolini.
    NADT.

  34. Dot says:

    Cops mowing down sunbathers at Bondi beach?

    Kebab eaters up on the footpath near the 333 bus stop.

  35. Squirrel says:

    The only things roaring are government spending, government debt and asset prices in our bubble economy.

    All of the cherry-picked stats are meaningless for as long as we persist with the fantasy that extraordinary fiscal and monetary measures are really not all the extraordinary after all, and that we can (at some yet to be defined point in the future) simply stroll away from those measures and get back to the pre-virus normal.

  36. Eyrie says:

    Aside from the obvious effects of border closure, the loss of migration is a drag on GDP growth.

    Who gives a rat’s? GDP per capita is the only thing that counts.

  37. Kneel says:

    “…the most widely accepted data series suggest population mortality can reach at least 0.3% in middle sized, middle income economies.”

    And?
    Try doing a multi-variate analysis with age and co-morbidities – it tells a very different story.
    CV-19, unlike say normal seasonal flu, is as near as makes no odds harmless the those under 20.
    Unlike swine flu, asian flu etc, CV19 is an insignificant risk to an infant.
    If you are over average life expectancy, the risk is higher, but you are still ten times more likely to be killed by something else.
    Lockdowns make things worse, not better – you are 100 times more likely to catch CV19 indoors than out, and the hotter it is, the lower the outdoor risk.
    Masks are of little to no benefit at avoiding the spread of CV19, and actually significantly increase the risk of bacterial and other infections when worn for > 4 hours at a time.
    Standard, generic and cheap anti-virals like ivermectin (a drug that is safer than aspirin, BTW) are effective at keeping symptoms below the level requiring hospitalisation.

    Now, granted, we didn’t know all of this when it all started, but we do now. So why is Vic in a lockdown?
    Why are we panicking about a nasty flu to kills the old and infirm, but leaves the young and healthy with barely an issue? Did we ask the old and infirm about this?
    I mean, I’m sure they don’t want to die (who does?), but do you really think an 80 year old would demand crippling debt for the grand-kids just to live a a few years more? I almost guarantee you most would say “Don’t worry about me, I’ve had a good life. Think of the kids – look after them first.”

  38. rickw says:

    The down dip in that chart needs to have a big arrow to it with the label “Government Helping”.

    The rebound in the chart needs to have another arrow with the label “Government starts looking for other people to help”.

    That’s basically what happened here. Government dived in to help, completely fucked things up, they realised they completely fucked things up, all of them have been quietly backing away ever since with the exception of Victoria.

  39. Angus Black says:

    @Sinc.

    It is considered unethical to submit a substantially similar piece to more than one outlet at a time

    Ethics & newspapers in the same thoughtbubble.

    Nice.

  40. Pyrmonter says:

    @ Kneel

    Steelmanning it – the case for ‘lockdown’ is that this is a disease transmitted by touch or by inhaling someone else’s exhalations; who is and is not infected is unknown, and in a practical sense, unknowable; a short term but severe curtailment of the number of people who encounter each other for long enough to infect each other has to reduce (and might even eliminate) further spread; ‘locking down’ then allows some of the information about who has been exposed to potential infection to be marshalled (‘tracked and traced’) allowing a narrower curtailment of movement.

    I’m not sure it works, but I don’t think the logic self-evidently false.

    I was surprised how long it took to eliminate infection last year, both here and abroad, where ‘elimination’ was treated as unachievable.

    Yet very low levels of detected infection grew rapidly over the northern winter, precipitating a further round of measures of this sort – often more onerous than the first round.

    For those who insist there are costs: yes there are. The issue isn’t one of eliminating cost, but effectively some sort of ‘social optimisation problem’. This is the stuff of blackboard economics, and has some quite sinister potential applications. Yet, having regard to the experience here and overseas, Australia (outside Victoria) showed last year that an investment in the pain of achieving elimination has been rewarded by lower long term cost: the area of Sinc’s deviation from long term growth is smaller for Australia than for almost any other country, anywhere. What we can make of this year – with the Feds’ penny-pinching having delayed vaccination by months – is a different question.

  41. max says:

    economy is now bigger than it was pre-pandemic,

    he probably meant fatter and less healthy

  42. Sinclair:
    A question from an economic dumbarse:
    Is there a measure of economic activity that shows if the private sector is sinking or swimming?
    Ta.

  43. Kell Collins says:

    Just on the Frydenberg quote at the top here:

    “We’re continuing to lead the world in our economic comeback – with our economy growing by 1.8% in the March quarter.”

    Australia’s latest quarterly growth figure ranks 18th in the world out of 54 countries which have reported March figures so far.

    The annual growth figure ranks equal 19th in the world.

    The Treasurer is currently averaging more than ten easily disprovable blatant falsehoods in his speeches and interviews.

  44. Kell Collins says:

    Apart from that, Sinclair’s analysis here is completely correct.

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