Following â??negative growthâ?? during the September quarter last year (-0.3%), Treasurer Michael Costa and Premier Morris Iemma were given a boost of confidence this week when it was announced that the NSW economy has returned to positive growth territory (1.4% in the December quarter). Itâ??s amazing how much bluster can be produced with the release of one key statistical metric.
Simon Benson from the Murdoch stables suggests that Morris Iemma has been â??saved from an election-eve nightmareâ?? by the release of last quarterâ??s positive growth figure. Thatâ??s probably hyperbole if ever there was hyperbole, but there is no doubting that the release of this figure is good news for the Iemma Government and bad news for the Debnam Opposition. Two consecutive quarters of negative growth would technically have allowed the Opposition to cry recession and let slip the dogs of war, but that scenario will now not eventuate â?? at least not in time for the election.
Michael Costaâ??s take on the figures was baffling and unhelpful:
Not only are we in the middle of an election campaign, we are also facing today the release of some national accounts statistics that I suppose in astrological, or astronomical, terms is the alignment of a solar eclipse or something of that nature,” Mr Costa said.
“If you’re more into popular culture it would be the equivalent of Paris Hilton saying something intelligent or Britney Spears remembering her undergarments.”
Surely this must be the first time in history that Paris Hilton and Britney Spears have been referenced in relation to economic figures released by a government, anywhere in the world?
More seriously, the meaningfulness of this figure in practical terms is surely under real question. December quarters are in any case traditionally strong thanks to Christmas and post-Christmas sale shopping binges. Does the average family living in suburban Sydney or a rural community feel any better about their economic status if economic growth in their state is reported at 1.4% as compared to -0.3%? Did the average small business owner do better in December than they did in September?
It is such an abstraction of regional performance that I am not sure that it means very much at all to anyone except the economic boffins.
The number wasn’t even about economic growth, that is, how much was produced in NSW in the December quarter, aka gross state product. It was about “state final demand”, which measures how much was spent by people in NSW. State final demand leaves out exports (stuff that is produced in NSW but bought by people outside NSW) and includes spending on imports (stuff that isn’t produced in NSW, like cars made in Victoria and plasma TVs made in China).
Economically, state final demand means very little. Costa would have been advised of this, which could be why he played it down. But politically, it seems to have done the job, from Iemma’s point of view.
“December quarters are in any case traditionally strong thanks to Christmas and post-Christmas sale shopping binges.”
The number excludes the effect of Christmas shoppibng, as it is “seasonally adjusted”.