Yesterday’s national accounts make uncomfortable reading, not just for the economic Hanrahans but also for spruikers of two great media-driven issues of the past year: productivity and the death of manufacturing.
Yesterday’s data significantly changed what we know of GDP per hours worked (ie: labour productivity) over the past year. The March quarter saw GDP per hours worked rise by 0.9%. And the upwards revision of GDP in previous quarters also saw GDP per hours worked from 2011 rise. The December quarter saw a rise of 0.9% as well, and the September quarter 0.7%. Market sector gross value added per hours worked rose even faster — by 1.2%, 1.2% and 1.0% over the March, December and September quarter. In fact, the past year has seen the fastest GVA per hours worked growth since 2003.
So, memo to the worry warts at The Australian, Fairfax (especially the Financial Review) and Business Spectator (especially Bob Gottliebsen): right through the whole time we’ve been hearing economists and the business community whingeing about labour productivity over the past 12 months, it’s been going up at a faster rate than at any time in a decade. Where to now for the IR deregulationists?
The data is especially humiliating for Business Council president Tony Shepherd. Today the BCA is releasing a report purporting to demonstrate how much more expensive projects are and how much less productive Australian workers are compared to the United States. The report was given to The Australian, where that good and faithful servant of the party line, Annabel Hepworth, gave it a free plug, including repeating its claim that “productivity is getting worse”. No one else has been given access to it, so the BCA gets lots of free publicity but no effective scrutiny.
But, inconveniently, yesterday’s data has put in context all the whining about how slack Australian workers are that we’ve been hearing for months. And, by the way, what about US labour productivity? Yesterday, the US Labor Department said productivity in the Land of the Free dropped 0.9% in the first three months of the year, compared to an earlier estimate of a 0.5% decline.
The improvement in productivity here seems to be coming as employers trim workforces to more closely match demand, rather than hang on to labour in the expectation of a surge in demand. Hours worked are flat or have even fell, while GDP output has increased. The change seems to have started in the second half of the year as demand from retailing and home building and some parts of manufacturing eased. In other words, companies and businesses have cut staff levels, but been able to maintain or boost output from the smaller workforce.
In commentary on the data, Westpac said that “as the labour hoarding of 2010 gave way to the efficiency drive (read weak employment in the currency/consumer/interest rate sensitive sectors) of 2011, productivity has improved, but supply side shocks blurred the underlying trend. The productivity payoff now seems to be coming through, helped by increasing supply capability and capacity utilisation in the resource sector, but in the non-mining economy perhaps at the (temporary) expense of the level of employment.”
There’s a related tale about manufacturing, which we’ve been told for more than a year is a basket case. The sector has been shedding workers rapidly — more than 30,000 in the 12 months to February. Yesterday, the ABS said the trend estimate showed a contraction of 0.5% in the quarter in manufacturing while the seasonally adjusted figure was down 0.8%: “The contraction in Manufacturing was mainly driven by food, beverage and tobacco manufacturing (-6.0%).” Westpac termed manufacturing growth “anaemic”.
But it depends which area of manufacturing you’re talking about. “Metal products continue to do alright (sic) (4.2%yr), as do some of the heavy industrial sectors (petroleum, coal, rubber and chemicals activity is up 3.7%yr, machinery and equipment 4.7%yr), indicating that some residual benefit from the engineering construction boom is coming the sector’s way, but the benefits are patchy rather than universal. Those manufacturers that are feeling the pinch are those exposed to the high currency (exporting and import-competing firms) and those servicing the weak non-infrastructure construction segment,” Westpac added.
Manufacturing remains a large, varied sector of the economy and a big employer. Parts of it are facing a competitive shock from the high dollar. That is driving productivity gains within the sector, as well as driving out less efficient and productive businesses. That’s what competition does. And it’s curious, but whenever business talks about productivity, they don’t seem to talk about the need for more competition, just the need to reduce wages and conditions for their employees.
And finally, where are all the inflationistas who worry that inflation is out there, just waiting to devour us, thanks to rising oil prices (now easing), the price of bananas (up and down in a year) or the carbon tax? Since the March quarter consumer price data was released, the inflationistas have gone into hibernation, and so they should be, as the national accounts confirm, inflation is not a worry and in fact there were signs of deflation in the quarter (which we saw from the prices of fresh fruit and vegetables).
The ABS uses a series of deflators to measure costs in the national accounts. The household consumption deflator (HCD) was flat in the quarter, for an annual rate in the year to March at 1.4% (the headline CPI was 1.6%). The Gross National Expenditure deflator (which is unaffected by the falling terms of trade) was flat, leaving the annual rate at just 1.0%.
The overall GDP implicit price deflator (which is impacted by the terms of trade) fell 1.0% in the quarter to be up just 0.2% over the year (thanks to the falls in the terms of trade in the quarter and the year). Westpac commented “The weight of evidence is overwhelming: the overall economic environment is clearly disinflationary at present.”
The inflationistas can stay in their burrows for at least the rest of winter.
Low inflation
Low unemployement despite a significant increase in participation
Economic Growth
A budget under relative control
National infrastructure being done
Low interest rates
and so on
All done in a hung parliament with a hated PM.
Just when will the truth get out.
We have a competent govt ( not perfect) managing a difficult circumstance well but with terrible press and an endless capacity to shoot itself in the foot in the PR wars
Against this the vested interests are pressing for an unethical and economical illiterate oppostion toto be in power.
“So, memo to the worry warts at The Australian, Fairfax (especially the Financial Review) and Business Spectator (especially Bob Gottliebsen): right through the whole time we’ve been hearing economists and the business community whingeing about labour productivity over the past 12 months, it’s been going up at a faster rate than at any time in a decade.”
Just where does Bernard find the unmitigating gall to introduce facts into a politically dogmatic narrative of gloom and doom. Just because we are doing brilliantly, by just about every measure in the economy, gives him no right to suggest that the doomsayers are wrong, even when they patently are.
Come on, where are the defenders of freedom of speech? If the Australian wants to say that we are going to hell in a handbasket because of the worst government in history, surely they should be allowed to in spite of the facts that they are wrong, indolent, ignorant, muddled, boneheaded and compromised.
Hint: Sarcasm, just in case you weren’t getting it.
How can productivity, or to be more precise, products per wage, be discussed without entering into
calculations the almost fifty percent of wage costs that go to interest or rent on a trillion dollars of
housing debt? Too Hard to grasp? Australians work very hard, you cannot service the world’s highest levels of private debt, (Thankyou John Howard ) without working very hard (Tony Abbott being a glaring exception). So it is not a narrow view of productivity within the workplace which should be the sole focus of concern when, clearly, jobs are being exported to countries whose workers are not burdened with the world’s highest levels of unsustainable private debt for non-wealth producing real
estate assets. (the cause of the global financial crisis). Thankyou John Howard and the housing/banking industry cartel holding the nation to ransom.
Those unwilling to agree with this analysis may wish to visit the inter-war housing policies of the state of South Australia, at that time not noted for its mineral wealth. Inexpensive housing estates were built anticipating that manufacturers would be attracted to a state with low housing and therefore low wage costs, with low wage costs increasing, absolutely, the prouctivity per wage.
Or to labour the point consider the Marshall amd Macarthur Plans for employment for post-war Germany and Japan, where capital was quarantined for manufacturing with non-productive housing left to fend for itself.
Actions to now underpin manufacturing productivity by actively providing affordable housing are hampered by the above mention holders, really owners, of the Trillion dollar plus housing mortgage market, who because of cartel behaviour and political influence,( owning their very own political parties) can and do act to stop any move to lower cost housing as “undercutting the market” and threatening the values of their mortgage holdings.
Read professor Edward Shann’s “Economic History of Australia” to see how the trickle feed of residential Crown Land releases to provide Crown income was taken over by local governments controlling land releases to maintain high prices for the profit, not of the Crown, but for private speculators.
Seen any action on that front in Qld lately? Ian Temby the original Independent Commissioner against Corruption found the greatest climate for incompetence and misconduct (Temby’s criteria for corruption) took place at the local government level.
Oh yes, I forgot it is all Julia’s fault. Enough said!
As Adam Smith proved, wealth is based upon manufacturing with all other workers being dependent upon the productivity (Relevance! Relevance!) of primary and secondary industry, agriculture and manufacturing.
So a balance has to be struck between the interests of wealth producing industry, formerly represented by the various Chambers of industry and the the nonn-wealth procing sector represented,
typically by Chambers of Commerce. Not producing any wealth themselves, Smith showed that the “commerce sector” could only raise profits by reducing wages. The manufacturers as shown later in history by Henry Ford’s famous doubling of workers wages with a “Five Dollar” day proved Smith’s analysis of wages as “returning Capital”. Ford got his back when his workers bought the cars they made. So commerce and industry have competing objectives with regard to wages, one trying to avoid them altogether and the other using wages to create a market for their products. IT AIN’T MARXISM!!
The fine balance was subverted to national cost when the Chambers of commerce subsumed the chambers of industry and the banking cartels have been dining on the carcass of the goose that laid the golden goose ever since. Imagine the econofops trying to explain the Golden Goose story to anyone, it would be buried under years of university studies and about a thousand learned tomes.
Fairy tale writers get busy you have a democracy to save. The DLP stooges are alreadt at it with their “it’s all Witchcraft” nonsense.
The Goose that laid the golden egg, is captured and eaten by those ignorant of the source of wealth.
Read” Abbott and the DLP Stooges”, What? no wisdom to be found in folk tales? They usually have some sustaining connection with historical truths, matched to an unsophisticated but not unintelligent level of understanding.